Laying the Foundation for a Bright Future Assessing Progress Under Phase 1 of India’s National Solar Mission

Interim Report: April 2012

Prepared by

Council on Energy, Environment and Water Natural Resources Defense Council

Supported in part by: ABOUT THIS REPORT

About Council on Energy, Environment and Water The Council on Energy, Environment and Water (CEEW) is an independent nonprofit policy research institution that works to promote dialogue and common understanding on energy, environment, and water issues in India and elsewhere through high-quality research, partnerships with public and private institutions and engagement with and outreach to the wider public. (http://ceew.in).

About Natural Resources Defense Council The Natural Resources Defense Council (NRDC) is an international nonprofit environmental organization with more than 1.3 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world’s natural resources, public health, and the environment. NRDC has offices in New York City; Washington, D.C.; Los Angeles; San Francisco; Chicago; Livingston and Beijing. (www.nrdc.org).

Authors and Investigators CEEW team: Arunabha Ghosh, Rajeev Palakshappa, Sanyukta Raje, Ankita Lamboria NRDC team: Anjali Jaiswal, Vignesh Gowrishankar, Meredith Connolly, Bhaskar Deol, Sameer Kwatra, Amrita Batra, Neha Mathew Neither CEEW nor NRDC has commercial interests in India’s National Solar Mission, nor has either organization received any funding from any commercial or governmental institution for this project.

Acknowledgments The authors of this report thank government officials from India’s Ministry of New and Renewable Energy (MNRE), NTPC Vidyut Vyapar Nigam (NVVN), and other Government of India agencies, as well as United States government officials. We would also like to thank former MNRE Secretary Deepak Gupta. We are grateful to the solar developers, financial institutions, solar manufacturers, solar energy experts, academics, and community members who shared their feedback and helped inform the findings of this report. The authors would also like to thank the following people, who acted as peer reviewers, for their valuable insights: Pierre Bull, Suman Kumar, Peeyush Mohit, Rana Mookherjee, Rajesh Peddu, P. Ramana Reddy, A. P. Shrivastava, Ashish Shrotriya, Cai Steger, and Atul Vijaykar. We would especially like to thank Shakti Sustainable Energy Foundation and our other funders for their generous support. This report is supported, in part, by Shakti Sustainable Energy Foundation. The views expressed and analysis in this document do not necessarily reflect views of the Foundation. The Foundation does not guarantee the accuracy of any data included in this publication nor does it accept any responsibility for the consequences of its use.

Scope of Report This report focuses on the Jawaharlal Nehru National Solar Mission’s objectives, targets, and incentives for grid-connected solar photovoltaic (PV) projects in India. The Mission’s goals relating to solar thermal and off-grid solar projects are not covered in this report.

Methodology This report adopts a whole-of-system approach by focusing on various public and private institutions operating in the solar ecosystem, the record and challenges of commissioning projects, the bankability of projects, the building of a robust manufacturing base, and analysis of the related enabling environment for the industry. The process included initial identification of key solar stakeholders in India and internationally to understand stakeholder perspectives and barriers to effective implementation of the National Solar Mission. Primary research was conducted through extensive discussions during in-person meetings, phone conversations, and written communication, and during conferences and workshops, including SOLARCON and Intersolar 2011. The organizations also engaged periodically with the Ministry of New and Renewable Energy as well as other government agencies to understand their approaches, innovations, and concerns about the Solar Mission.

NRDC Director of Communications: Phil Gutis NRDC Deputy Director of Communications: Lisa Goffredi NRDC Publications Director: Alex Kennaugh NRDC Publications Editor: Carlita Salazar CEEW Project Administration: Meena Sarkar CEEW Communications: Prachi Gupta Design and Production: Tanja Bos

COVER PHOTO: CREDIT: PUNJ LLOYD © Natural Resources Defense Council; Council on Energy, Environment and Water, April 2012 FOREWORD

India is blessed with abundant sunshine, in fact 300 days’ worth in most regions. Average incident solar radiation ranges between 4 and 7 kilowatt-hour per day per square metre – much higher than the amount of solar radiation in many other countries. Meanwhile, 70 percent of India’s primary energy supply relies on fossil fuels while hundreds of millions of people need access to modern sources of energy. In 2010 India launched the Jawaharlal Nehru National Solar Mission, one of the world’s largest solar energy programmes. The aim is to install 20000 megawatts (MW) of grid-connected solar power and 2000 MW of off-grid solar power by 2022. This is an ambitious mission with the promise of responding, in part, to India’s climate challenge and to increasing energy access. Like India, most of the solar potential world over is in tropical countries. But by one count, until 2010, eight of the top ten countries with installed solar photovoltaic capacity were in temperate zones. Clearly, there is a long way to go before India realises its potential in solar energy but the National Solar Mission has positioned itself to play a significant catalytic role. How it could do so is the subject of this report.

A nascent solar industry is beginning to take shape in India, with more than 500 MW of capacity installed already. Competitive bids for projects have also driven prices for solar power down rapidly. But installed capacity and prices do not complete the picture. There is a need to understand challenges in installing projects, so that developers are able to do so on time and feed electricity into the grid at committed capacities. There are also questions about choice of technology and policies related to sourcing cells, modules and other equipment. And, perhaps most importantly, solar projects have to be financially viable to attract the levels of investment necessary to meet the Mission’s targets. These issues are interconnected and interdependent, critical to the evolution of a solar ecosystem.

In order to examine all the dimensions of the ecosystem, the Council on Energy, Environment and Water (CEEW) and the Natural Resources Defense Council (NRDC) partnered to produce Laying the Foundation for a Bright Future. This report adopts a “whole-of-system” approach, identifying multiple stakeholders and focusing on all aspects of grid-connected solar power: selection, deployment and commissioning of projects; bankability and the role of various financial channels; the development of a robust manufacturing base; and the creation of an enabling environment with regard to land, power evacuation, skills, and so forth.

I wish to congratulate the team comprising independent researchers from CEEW and NRDC, which has not only conducted in depth analysis of its own but also engaged with a wide set of stakeholders within and outside India. I am sure that the findings and recommendations of this report would be relevant not only for government agencies (at the national and state levels), but also for project developers, manufacturers, financiers, donor agencies, R&D and research institutions, and others keen on the success of the National Solar Mission.

Jamshyd N. Godrej Mumbai Co-Chairperson, Council on Energy, Environment and Water April 2012

PAGE i | Laying the Foundation for a Bright Future

TABLE OF CONTENTS

Foreword...... i

I. Executive Summary...... v

II. Introduction...... 1

III. Stakeholders: Need for a Solar Ecosystem...... 4 Strategic Level...... 5 Project Level...... 5 Supporting Environment...... 5

IV. Phase 1 of the National Solar Mission: “Building Solar India” ...... 6 Phase 1 Project Analysis and Discussion...... 7 Phase 1’s Tiered Approach...... 9 Key Findings from Phase 1...... 10

V. Bankability: Financing Solar Energy Projects...... 11 Current Financing Issues: Perceiving Many Types of Risk...... 11 Lack of Awareness and Information to Address Perceived Risks...... 12 Mixed Support from Several Sources; Coordination Needed...... 13 Key Findings...... 16 Key Recommendations...... 16

VI. Manufacturing: Supporting a Domestic Industry ...... 17 Benefits of a Strong Domestic Solar Manufacturing Base...... 17 Role of Manufacturing in Job and Value Creation...... 18 Domestic Manufacturing Issues in the Indian Context ...... 19 Domestic Content Requirement’s Effects on Manufacturing ...... 20 Key Findings ...... 23 Key Recommendations...... 23

VII. Enabling Environment: Facilitating Land Acquisition, Permitting & Power Evacuation...... 25 How to Create an Enabling Environment ...... 25 Key Findings ...... 28 Key Recommendations ...... 29

VIII. Conclusion ...... 30

IX. List of Stakeholder Organizations...... 31

X. Endnotes...... 32

PAGE iii | Laying the Foundation for a Bright Future TABLES Table 1: National Solar Mission Targets 2010 to 2022...... 2 Table 2: National Solar Mission Solar Project Process...... 5 Table 3: National Solar Mission Phase 1 ...... 7 Table 4: A range of private and public institutions have a role in enhancing bankability and overall solar market development ...... 13 Table 5: Distribution of Jobs Across Solar Value Chain...... 18 Table 6: Country Comparisons of Solar Manufacturing Policies, Production, and Capacity ...... 20 Table 7: Domestic content requirements or incentives have had some success globally ...... 22 Table 8: Solar Project Land Development Options...... 26

FIGURES Figure 1: A successful solar ecosystem depends on the effectiveness of various individual enablers and stakeholders and coordination among these...... 4 Figure 2: Rajasthan and Gujarat, which are endowed with the highest irradiation, led Phase 1 installations ...... 7 Figure 3: Bundling of Power Scheme: An innovative mechanism to reduce the price burden of solar...... 15 Figure 4: More than half the jobs and value generated lie downstream of modules...... 19 Figure 5: The mix of PV technologies deployed in the Indian market is markedly different from the mix deployed globally...... 21

LIST OF ABBREVIATIONS ADB Asian Development Bank GW Gigawatt NVVN NTPC Vidyut Vyapar ARRA American Recovery and HBL Hindu Business Line Nigam Reinvestment Act ICICI Industrial Credit and OPIC Overseas Private BEE Bureau of Energy Investment Corporation of Investment Corporation Efficiency India OREDA Odisha Renewable Energy CCCL Consolidated Construction IREDA Indian Renewable Energy Development Agency Consortium Limited Development Agency PPA Power Purchase CEEW Council on Energy, JNNSM Jawaharlal Nehru National Agreement Environment and Water Solar Mission PSM Payment Security CERC Central Electricity kWh Kilowatt hour Mechanism Regulatory Commission LBNL Lawrence Berkeley PSS Payment Security Scheme CIF Climate Investment Fund National Laboratory PV Photovoltaic CRISIL Credit Rating Information LOI Letter of Intent R&D Research and Services of India Limited MAHAGENCO Maharashtra State Power Development CTF Clean Technology Fund Generation Company RE Renewable Energy CWET Centre for Wind Energy MNRE Ministry of New and REC Renewable Energy Technology Renewable Energy Certificate DCR Domestic Content MOEA Ministry of Economic RPO Renewable Purchase Requirement Affairs (Taiwan) Obligation Discom Distribution Company MOEF Ministry of Environment SECI Solar Energy Corporation EEG Erneuerbare-Energien- and Forests of India Gesetz (Germany’s MOP Ministry of Power SEIA Solar Energy Industries “Renewable Energy MW Megawatt Association Sources Act”) NAPCC National Action Plan on SIPS Special Incentive Package EPC Engineering, Procurement, Climate Change Scheme and Construction NASA National Aeronautics and SOLARCON Solar Convention in India, EPIA European Photovoltaic Space Administration Organized by SEMI Industry Association NCPRE National Centre for SPV Special-Purpose Vehicle EU European Union Photovoltaic Research and TPVIA Taiwan Photovoltaic EX-IM Export-Import Bank of the Education Industry Association United States NRDC Natural Resources WTO World Trade Organization FIT Feed-In Tariff Defense Council GIZ Deutsche Gesellschaft NSM National Solar Mission für Internationale NTPC National Thermal Power Zusammenarbeit Corporation

PAGE iv | Laying the Foundation for a Bright Future I. EXECUTIVE SUMMARY

rom tentative beginnings, India’s solar energy market is picking up steam. From 17.8 megawatts (MW) in early 2010, cumulative installed capacity reached 506.9 MW at the end Fof March 2012.1 The Jawaharlal Nehru National Solar Mission (NSM or Mission), launched in 2010, has catalyzed much of this growth. Even with 300 sunny days a year in most regions, creating a new solar energy market in India is no easy task.

Making headlines in late 2011, competitive bidding for the Addressing these challenges, the report presents findings Mission’s second batch of projects under Phase 1 drove and recommendations to scale grid-connected solar energy prices for grid-connected solar energy as low as `7.49 development. The report draws from extensive individual ($0.15) per kilowatt-hour, approaching grid parity with and group stakeholder discussions as well as research and fossil fuel-powered electricity. Phase 1 also attracted large analysis of national, state, and international programs. conglomerates and new players into the solar market. “Bid euphoria,” however, is wearing off, and serious doubts remain as to whether the Mission’s Phase 1 projects will PHASE 1 OF THE NATIONAL SOLAR MISSION: meet commissioning deadlines. Although several projects “BUILDING SOLAR INDIA” have been commissioned since January 2012, concerns During the Mission’s first phase, more than 500 bidders about project delays are expected to overflow into future competed for 63 projects allocated during two reverse stages of the Mission. As the Mission heads into Phase 2, auctions, driving prices to record lows. New solar energy larger questions loom. It is unclear whether it is on course to investments in India increased to more than `12,000 crore achieve 20 gigawatts (GW) of installed solar capacity by 2022, ($2.5 billion) in 2011. Phase 1 activities have focused largely and how the Ministry of New and Renewable Energy (MNRE, on achieving 1,000 MW of solar energy through an equal the nodal agency for the Mission) and other government split between solar thermal and solar PV project technology. agencies, as well as stakeholders—including developers, Although Indian industries have responded positively to the financial intermediaries, manufacturers and communities— Solar Mission, it faces several hurdles in moving ahead. To can be more effective in scaling solar energy to power one of scale solar energy, the central government—with coordinated the world’s fastest-growing economies. action by states, developers, financial institutions, The Solar Mission follows a phased approach that allows manufacturers, research institutes, and communities—needs the government to modify guidelines and policies based on to develop effective solutions for more credible project the experiences gained and lessons learned in earlier phases. bids, enforceable Renewable Purchase Obligations (RPOs) This report adopts a “whole-of-system” approach, which and Renewable Energy Certificates (RECs), strong financial identifies multiple stakeholders operating within the Mission structures, increased domestic manufacturing, and reliable and analyzes their successes and challenges. The report power evacuation and transmission. Moreover, off-grid examines the commissioning of Phase 1 projects, efforts to solar energy, largely a missed opportunity so far, is ripe for increase bankability, the development of a manufacturing investment. base, and the creation of an enabling environment.

PAGE v | Laying the Foundation for a Bright Future OVERALL FINDINGS attracting foreign investment, and creating jobs. Even so, many manufacturers expressed the view that the DCR, 1. The sophistication of solar energy stakeholders as currently structured, is not sufficiently stimulating is increasing. However, a much greater degree of local manufacturing. Manufacturers face other systemic coordinated stakeholder action is needed to unleash the limitations, such as poor infrastructure, lack of raw solar energy market’s potential. materials, an undeveloped supply chain, and lack of 2. As an overarching policy framework, the National Solar financing. Mission (NSM) aims to increase deployed capacity, 8. Many developers have faced difficulties in obtaining enforce regulatory obligations for using renewable clearances to convert land use for solar project energy, create a manufacturing hub in India, and development and encountered claims by other parties promote research and development (R&D) for new to government-allocated land. In terms of infrastructure, solar technologies. These objectives will be achieved in some developers have experienced difficulties with different time frames and therefore should be correctly power evacuation and transmission lines to substations. prioritized by the central government. Limited availability of skilled labor also remains a barrier 3. Infrastructure, policy, and market conditions are shaping to wide-scale project development. India’s solar market differently from other solar markets. 9. To protect local interests and the environment, Unique attributes include the prevalence of ground- developers and government agencies need to increase mounted solar parks, thin film PV technology used in community involvement in the decision-making process, more than half the projects, and low bid prices that make from project planning to operations. grid parity possible in the near future. 10. All stakeholders agree that while Phase 1 focuses on 4. Overall, stakeholders viewed the reverse auction bidding grid-connected projects, off-grid solar energy provides process as transparent and successful in driving down an even larger opportunity. They state further that prices. However, financial institutions, civil society stakeholders should work collectively to develop both groups, and some developers suggested that in order public and private strategies for large-scale deployment to draw serious players with an ability to ensure project of off-grid projects. completion, and attract financing, project selection criteria should be more rigorous. Moreover, for the Mission to remain credible, financial due diligence BANKABILITY: FINANCING and continuous monitoring are needed to ensure that commissioned projects are operational at contracted SOLAR ENERGY PROJECTS capacity and generating solar power that is transmitted In 2011, investments in India’s renewable energy markets to the grid. rose to approximately `51,000 crore ($10.3 billion),2 with 5. Indian bankers still perceive significant risks in more than one-third of the investments directed to solar the solar energy market and are largely hesitant to projects. Investments are expected to double for Phase 2. Yet make substantial investments in solar technologies. the greatest challenge for solar energy is project financing. International lenders, less risk-averse on the technology Even for smaller Phase 1 projects, developers struggled to front, offer lower interest rates but remain skeptical raise capital from multiple domestic, international, and self- about project completion. To bolster confidence among financing sources. While there has been some improvement, financiers, a range of funding channels, financial most domestic banks still perceive significant risks in solar institutions, and other stakeholders must coordinate at investments. International and bilateral lending institutions program and project levels and provide ancillary support, that supported several Phase 1 projects remain interested such as R&D and skill development, to help the solar in supporting additional projects but want more rigorous market mature. project selection requirements, such as balance sheets and vetted collateral. Well-structured RPOs, RECs, and innovative 6. State policies have contributed to boosting solar funding mechanisms are opportunities for increasing projects in the past two years, especially in Gujarat and investments in solar energy. In short, with major information Rajasthan. For Phase 2, the central government needs gaps and potential market failures, financial markets will not to increase collaboration with states to facilitate RPO automatically warm up to the solar market without strategic and REC compliance, project bidding, financing, power interventions to create a financing ecosystem. evacuation, transmission, and land acquisition. 7. While the domestic content requirement (DCR) has Key Findings for Bankability garnered international attention and raised concerns 1. India’s high interest rates impede project development, among some foreign stakeholders, most developers do especially as the costs of solar plants are largely in up- not identify it as a major barrier to project development. front capital. Overseas financing is more attractive, both The case for a robust domestic manufacturing base for lower interest rates and for longer-term debt, which rests on multiple objectives: energy security, technology match the longer payback period of solar loans. development, energy access, ensuring product standards,

PAGE vi | Laying the Foundation for a Bright Future 2. Banks have a low comfort level with solar investments energy. Such a network could work together to syndicate because of the lack of information available, and need loans, share information, and conduct workshops where more data and statistics on project development, bankers, developers, manufacturers, and entities in deployment, and performance. They also need irradiance engineering, procurement, and construction (EPC) can measurements from local settings, which are currently come together to exchange knowledge and experiences not recorded. about solar investments. 3. Financial institutions perceive solar energy in India as a riskier investment because it is a fledgling industry without a proven track record in meeting commissioning MANUFACTURING: SUPPORTING A deadlines, performance benchmarks, and delivering DOMESTIC INDUSTRY power. Solar cell and module manufacturing offers India a long- 4. RECs represent an opportunity to support the term opportunity to become a major manufacturing player, solar market, but regulators need to strengthen the accelerate grid-parity, and build a sustainable solar industry. mechanisms for trading and enforcement since The Mission’s Phase 1 domestic content requirement uncertainty about enforcement diminishes investor mandated local manufacturing of crystalline PV modules confidence. for Batch I projects, and both cells and modules for Batch 5. Capacity building and networking among banks and II projects, while exempting thin film PV. While most local other financial intermediaries are needed to increase stakeholders strongly favor domestic manufacturing policies, information sharing and awareness within the financial at this stage it seems that the DCR has been only marginally community. The Ministry of New and Renewable Energy effective in creating a vibrant domestic manufacturing base. (MNRE) has initiated activities toward awareness building and information dissemination, but much more Key Findings for Manufacturing can be done. 1. Phase 1’s domestic content requirement has contributed to shifting the market toward thin film PV projects due to their exemption from the DCR. Fifty-percent of Batch Key Recommendations for Bankability I projects use thin film and crystalline cells, a larger 1. Regulators should diligently enforce RPO mandates and proportion than in the global PV market. Batch II projects the REC market. National and state agencies should use even more thin film technology, probably because work together closely to ensure effective RPO and REC Batch II requirements for domestic crystalline cell systems. manufacturing have made lower-priced, imported thin 2. With the Reserve Bank of India and the Ministry of film, often coupled with low-cost international financing, Finance, MNRE should encourage priority sector lending more attractive to developers. for large-scale solar projects to help reduce lending 2. The Phase 1 domestic content requirement as currently rates to as low as 10 percent and to provide higher structured has not effectively created the market employment potential for downstream solar activities. conditions for local solar PV manufacturing envisioned 3. To provide longer-term debt, the government should by the NSM. The DCR has not created a level playing enhance funding mechanisms, including the proposed field. Instead it has contributed to a strong thin film bias Infrastructure Debt Funds. To further reassure financiers, and has possibly been a detriment to Indian crystalline- MNRE should share information on the payment based manufacturing. security mechanism (PSM) and clarify how the PSM has 3. The Indian solar cell manufacturing system requires been calculated to effectively cover potential default on systemic improvements in infrastructure, domestic low- payment. cost financing, and raw materials. 4. Government agencies and private groups should provide 4. More than half the jobs in the solar value chain and value solar resource and project deployment data as soon creation are not in solar manufacturing, nor specifically as they become available. MNRE and the Solar Energy in cell and module manufacturing. Severe environmental Corporation of India (SECI) should work with developers costs linked to unregulated solar manufacturing also to establish monitoring and reporting processes that can exist. be implemented before Phase 2. SECI should become a 5. A modified DCR could have a positive influence on central clearinghouse for all information dissemination domestic manufacturing if it is technology-neutral and relating to the solar ecosystem. A sharing platform not overly restrictive. for improved irradiance data should be created to disseminate information as it is generated. 5. The Solar Advisory Panel and leading financial institutions should create a network of solar finance leaders to develop bank products that support solar

PAGE vii | Laying the Foundation for a Bright Future Key Recommendations for Manufacturing 4. Actively involving communities in every stage, from planning to operation, will strengthen solar energy 1. The central government, with stakeholder input, should projects. Project developers already recognize that explore whether incentivizing policies with a broader there are co-benefits that can be shared with local scope than solely cell and module manufacturing would communities and that problems can arise if local capture more value and create more solar jobs within the communities are not engaged throughout the process. Indian context. 5. To enable industry progress, developers, banks, and 2. MNRE should tailor the DCR to be technology-neutral other stakeholders have identified the need for a long- and market-enabling. MNRE could explore two options: term implementation plan that focuses on the entire (a) a DCR requiring that all PV modules be manufactured supply chain, investment in research and development, in India, uniformly enforced across all PV technologies, labor force training, and the provision of sufficient and or (b) a DCR specifying that a certain percentage of solar customized financial incentives. PV components be manufactured in India. 3. To avoid being restrictive and to lessen the potential for international controversy or trade disputes, MNRE Key Recommendations for Enabling Environment could consider incentives other than a DCR, such as a 1. The central government should closely and preferential tariff, to promote domestic manufacturing. systematically coordinate with state governments on project allotment, land acquisition, and project 4. Manufacturers should strengthen existing networks, development, particularly for the larger Phase 2 projects. such as SEMI, to explore ways to ease barriers to Specifically, MNRE should work with states to develop manufacturing in India. The manufacturing networks effective land allocation strategies for solar projects, could develop policy proposals to address natural including strategies to facilitate siting and planning resource, finance, and trade limitations. requirements. 5. MNRE should work with the Ministry of Environment 2. MNRE should also collaborate closely with the Ministry and Forests to strengthen environmental safeguards of Power to plan for transmission infrastructure upgrades to ensure that manufacturing can continue to grow within a long-term power planning framework focused rapidly while protecting community health and the on scaling renewable energy. environment. 3. Before bidding for Phase 2 projects begins, MNRE and developers should work together to resolve whether last- ENABLING ENVIRONMENT: FACILITATING mile infrastructure costs should be included in project LAND ACQUISITION, PERMITTING, AND estimates. POWER EVACUATION 4. To strengthen solar projects, developers should integrate local communities at the planning stage through regular One of Phase 1’s immediate goals is to create an “enabling community meetings and engagement. environment” for solar technology penetration in India. In addition to the broader areas of bankability and 5. The solar industry should create a network of solar manufacturing, our discussions with stakeholders identified energy groups focused on resolving common industry four main causes for delays in project implementation: land concerns, interacting with government agencies, acquisition issues, concerns with power evacuation, the developing solutions for the entire solar supply chain, lack of effective community involvement, and the lack of a investing in research and development, and increasing comprehensive Solar Mission implementation plan. the solar energy workforce.

Key Findings for Enabling Environment LOOKING AHEAD: THREE POLICY PRIORITIES 1. Land acquisition issues, including siting, clearances, and grid proximity, are delaying projects. Currently, land costs While the Indian government and solar energy stakeholders represent a small share of total project costs and are not have made significant progress, much more needs to be the most significant barrier to land acquisition. While done. Implementing three key policy priorities this year in early stages, solar parks have proved to be effective in would enable strong growth under the Solar Mission: facilitating project development and reducing delays. Benchmarks, Transparency, and Monitoring: There is an 2. Several developers and financiers have identified power urgent need to increase the level of information available evacuation and access to the grid as issues of concern, on the Mission’s progress. The government should enforce and in their absence, it has been difficult to secure periodic updates on each project’s progress, without which its financing for projects. project selection process and due diligence will be called into question. The government should adopt a common definition 3. Developers are confused about which entity or agency of “commissioning” as well as common benchmarks for is responsible for last-mile infrastructure, resulting in commissioning projects under the state and national project delays.

PAGE viii | Laying the Foundation for a Bright Future Missions. Moreover, for financiers to become more familiar Technology-Neutral Manufacturing: To make domestic with technologies, and for component standards to be closely manufacturing policies technology-neutral and market- monitored, project technology choices need to be transparent. enabling, MNRE could explore the following options: (a) Finally, irradiance data must be made publicly available to a DCR requiring that all PV modules be manufactured in increase confidence and investment in the solar market. India, uniformly enforced across all PV technologies; or (b) Strategic Financing: Central and state government agencies, a DCR specifying that a certain percentage of the solar PV with MNRE’s leadership, should develop a strategy to components be manufactured in India; or (c) a preferential optimize the roles of different financial institutions. As incentive to promote domestic manufacturing instead of a the market matures, various institutions should leverage DCR to avoid being restrictive and to lessen international their expertise to grow India’s solar market. For example, controversy. certain groups should focus on providing project financing, The NSM has the potential to transform India’s energy while others should focus on disseminating information sector and help power its rapid economic growth while to the market, and others should focus on R&D and skill building a sustainable future. India needs continued development. Only when a comprehensive financing strategy government and private sector support, increased is in place will different financial interventions (e.g., priority investment in manufacturing, and increased technology sector lending, development of the REC market, and the role sharing to unleash this potential in the Mission’s next phase. of infrastructure debt funds) succeed in scaling solar energy This report’s recommendations are submitted with a view investments. toward promoting a comprehensive and strategic approach to building a robust grid-connected solar industry in India.

PAGE ix | Laying the Foundation for a Bright Future

II. INTRODUCTION

ndia has entered a defining phase in its development. The country needs energy to fuel economic growth. However, with fossil fuels accounting for 70 percent of its primary energy Isupply,3 India is constrained by the limits imposed by dependence on imported fossil fuels and the imperative to mitigate greenhouse gas emissions. An accessible and affordable clean energy source is necessary to power India’s rapidly growing economy and promote low-carbon energy development.

As the country emerges as a global economic powerhouse, photovoltaic (PV) panel prices has coincided with the rising with a growing population expected to reach 1.47 billion by cost of grid power, quickly making solar cost-effective and 2030, its energy consumption will increase substantially.4 shortening the projected timeline to achieve grid parity.8 Unfortunately, current energy supply cannot keep up with With energy consumption projected to escalate and growing demand. Rolling power cuts from energy deficits domestic energy sources like coal becoming scarcer, India already reach 9 percent in the electricity sector.5 This current needs alternative sources of energy to power its growing lack of capacity excludes the 400 million Indians who have needs. As a local, abundant, and inexhaustible resource, solar no access to modern electricity at all. With rapidly urbanizing energy provides several long-term benefits to address the cities demanding more power, renewable energy—including urgent problems India faces now. With its potential to reduce solar—is critical to provide electricity while reducing reliance on imported and unreliable fossil fuels, solar power dependence on imported fuels and combating climate change. is an important part of India’s portfolio approach to energy security. In addition to its diversification role in India’s energy mix, solar energy clearly functions as part of India’s response to NATIONAL ACTION PLAN ON CLIMATE CHANGE climate change. Solar energy can lower the costs of mitigating n National Solar Mission climate change while helping India achieve its voluntary target of reducing carbon emission intensity from 2005 levels n National Mission for Enhanced Energy Efficiency by 20 to 25 percent by 2020. Solar power has the potential to n 9 National Mission on Sustainable Habitat eliminate 95 million tons of CO2 emissions annually by 2022. As a clean and renewable energy source, solar technology n National Water Mission has other local environmental benefits, particularly reducing n National Mission for Sustaining the Himalayan Ecosystem smog and air pollution. India’s ground-mounted projects n National Mission for a “Green India” have limited negative consequences, such as being very land-intensive.10 n National Mission for Sustainable Agriculture

n National Mission on Strategic Knowledge for Climate Change In 2011, the Indian government announced a new mission CREATING A NEW INDUSTRY: JAWAHARLAL to improve coal plant technologies. NEHRU NATIONAL SOLAR MISSION Despite its potential, India’s solar power capacity was almost nonexistent until recently. Creating a new industry, especially in the energy and electricity sector, is no easy task. Several INDIA’S OPPORTUNITY FOR SOLAR ENERGY questions arise: Should the focus be on grid-connected or off- With nearly 300 sunny days and high solar radiation in most grid power? If the former, do transmission lines exist in areas regions, India has abundant solar energy potential.6 As the with the maximum potential for generating solar power? And world’s third-largest energy consumer, and with a surging what policies are needed to encourage deployment? Should middle class, India also provides a unique opportunity these policies prioritize extending energy access or reducing for a thriving solar market.7 The precipitous drop in solar electricity costs? How soon could a domestic manufacturing

PAGE 1 | Laying the Foundation for a Bright Future industry develop to meet demands? Should India rely on DIVERSE OBJECTIVES domestically manufactured solar panels or remain open to The National Solar Mission aims to achieve a wide range imports? And how would India ensure that imported panels of ambitious objectives, with the overall stated goal of had consistent and reliable quality? How would the country “establish[ing] India as a global leader in solar energy, by balance deployment of existing technologies and research creating the policy conditions for its diffusion across the and development (R&D) of new ones? Under what conditions country as quickly as possible.”14 The Mission Document’s would financial institutions invest in a nascent industry? objectives consist of both specific goals to be accomplished What interventions could reduce the cost of capital, and within the phased timeline, and broader goals without a how would the industry access Indian and foreign sources of definite deadline. finance? How could the industry acquire land and access to other infrastructure to execute projects on time? Finally, how Phase 1 focuses on setting up an environment to enable solar can all this happen in a manner that is transparent (to avoid technology penetration at a centralized and decentralized corruption), flexible (to incorporate cumulative experience), level.15 Phase 1’s guidelines explicitly aim to facilitate and predictable (offering policy consistency over a sufficient quick implementation of the NSM, while ensuring serious period to encourage long-term investments)? participation by—and enhanced confidence in—the selected Set against these wide-ranging challenges, the MNRE project developers. Promoting manufacturing in India’s solar launched the Mission in January 2010. Announced by Prime sector is another Phase 1 goal. Minister Manmohan Singh in June 2008, it was one of eight Phase 2 contemplates an aggressive capacity ramp-up to 11 (now nine ) national missions outlined in the National facilitate competitive solar energy penetration in India. The Action Plan on Climate Change (NAPCC) (see ”National guidelines envision scaling up through enforcement of a Action Plan on Climate Change,” above). One of the NAPCC’s mandatory renewable purchase obligation (RPO) for utilities, aims is to address climate mitigation and adaptation, with backed by a preferential tariff. the vision to make India’s economic development energy- efficient.12 In accordance with the NAPCC, the NSM set bold Phase 3, the final phase, aims to meet or exceed the end targets emphasizing grid-connected applications, seeking to target of 20,000 MW of grid-connected solar by 2022. Rapid install 20,000 MW of grid-connected solar power and 2,000 scaling-up of installation during Phase 3 is anticipated MW of off-grid solar power by 2022. Qualifying projects are through the availability of international finance and selected through a reverse auction procurement mechanism technology. The NSM seeks to achieve grid parity by 2022 and and are ostensibly technology-neutral, employing either solar parity with coal-based thermal power by 2030. PV or solar thermal technology. The Mission Document anticipates that utility-scale The NSM Mission Document, released by MNRE in solar power in India will be driven by the RPOs mandated November 2009, sets out the Mission’s varied targets and for power utilities, with a specific solar energy component. objectives and provides guidelines and policy tools to Generally, the NSM aims to craft a policy and regulatory achieve these goals.13 The NSM’s grid-connected solar energy environment that provides a predictable incentive structure, targets offer clear benchmarks against which to measure enabling rapid and significant capital investment in solar the Mission’s progress. The NSM targets have been planned energy applications while encouraging technical innovation in three phases (see Table 1). In addition to meeting these and reducing costs. The Mission hopes to accomplish all concrete targets, the NSM’s guidelines also set out several of these ambitious objectives through its guidelines and diverse objectives with different timetables (or, in some cases, incentives. no clear timetable) to achieve them. The NSM also aims to transform India into a solar energy hub, making it a global leader in low-cost, high-quality solar manufacturing across the value chain. The Mission Document envisions creating favorable solar manufacturing

TABLE 1: National Solar Mission Targets 2010 to 2022

PHASE 1 PHASE 2 PHASE 3 SOLAR TECHNOLOGY (2010 to 2013) (2013 to 2017) (2017 to 2022)

Grid-connected/ rooftop 1,000 MW - 2,000 MW 4,000 MW - 10,000 MW 20,000 MW

Off-grid solar applications 200 MW 1,000 MW 2,000 MW

Solar hot water collectors 7 million sq. meters 15 million sq. meters 20 million sq. meters

Rural solar lanterns/ lighting N/A N/A 20 million systems

Source: Mission Document

PAGE 2 | Laying the Foundation for a Bright Future conditions, particularly for solar thermal for indigenous power from project developers and supply an allocated production and market leadership. The guidelines target a amount of MW capacity to the utilities. MNRE and NVVN also 4 GW to 5 GW equivalent of installed production capacity manage a payment guarantee fund to insure NVVN against by 2020, including dedicated manufacturing capacities losses, should the power remain unsold or the buyer default for polysilicon material to make solar cells amounting to on payments.18 The Indian Renewable Energy Development about 2 GW of generation capacity annually. The key to Agency (IREDA), a public limited government company that accomplishing this goal, according to the Mission Document, operates as MNRE’s financial arm, finances solar PV projects. is promoting PV manufacturing plants (including facilities Most recently, the Solar Energy Corporation of India (SECI) for the domestic manufacture of silicon material), thereby was created to serve as the executing arm of the NSM. reducing dependence on imports of raw materials. Has the NSM performed according to plan? Are the The Mission also highlights a major R&D initiative to numerous objectives and multiple timelines internally promote technology development and cost reduction. The consistent, or do they place an undue burden on a single top priorities of this program include improving efficiencies Mission? In fact, can so many objectives (installing capacity, in existing materials and applications, reducing costs of reducing costs, creating a manufacturing hub, encouraging solar systems, and establishing new applications that R&D, balancing grid and off-grid projects) be achieved improve integration. Rather than locking into specific solar through a single policy framework? This report has been technologies, the Mission states that it is neutral, allowing prepared to address these questions. market conditions to determine technology.16 Focusing on grid-connected solar power, the report adopts a comprehensive approach to identify all the moving parts and multiple actors and institutions operating SOWING THE SEEDS TO GROW SOLAR? within the Mission.19 It analyzes how each component of The NSM’s role is perhaps best understood as sowing the the solar ecosystem has performed and what conditions seeds of a new industry and nurturing the early stages of its enhance or impede chances of success. For each growth. Its many objectives operate according to different aspect—setting up projects, increasing their bankability, timelines and a dynamic set of guidelines. Some objectives developing a manufacturing base, and creating an enabling (such as establishing the first 1,000 MW of capacity) may be environment—the report identifies issues facing key met more quickly than others (developing a manufacturing stakeholders, analyzes what role the NSM has played in filling base or broadening financial sector involvement). Some existing gaps, and offers recommendations for improving objectives may be open-ended bets on the future, like implementation in subsequent phases. In doing so, we draw technology development, where the role of the NSM (and upon examples from other state missions within India as MNRE) might be fairly small compared with other parts of well as solar programs in other countries. The success of government and industry. India’s solar endeavor not only matters for its energy security The success of the Mission, measured against multiple and environmental imperatives, but also could offer lessons objectives, is also contingent on coordination among existing for other countries seeking to scale up access to clean, and new institutions. The NSM is overseen and implemented affordable, and sustainable energy to millions of people by MNRE. The NTPC Vidyut Vyapar Nigam (NVVN)17 enters worldwide. into 25-year power purchase agreements (PPAs) to procure

PAGE 3 | Laying the Foundation for a Bright Future III. STAKEHOLDERS: NEED FOR A SOLAR ECOSYSTEM

ealizing the Mission’s objectives for a vibrant solar sector depends on a robust solar ecosystem in India. A solar ecosystem refers to the entire environment, conditions, and Rstakeholders through which solar energy is created, purchased, and used. A successful solar ecosystem is dependent on the collective effectiveness and coordination among these stakeholders and can be arranged into the following three levels: the strategic policy level, the project level, and the supporting environment (see Figure 1).

FIGURE 1: A successful solar ecosystem depends on the effectiveness of various individual enablers and stakeholders and coordination among these

NATIONAL SOLAR MISSION VARIOUS STATE POLICIES NON-NSM NATIONAL e.g. e.g. POLICIES ■ MNRE ■ MOP ■ Gujarat ■ Karnataka e.g. ■ ■ ■ ■ ■ ■ LEVEL NVVN NTPC Rajasthan Tamil Nadu RPOs RECs

STRATEGIC ■ IREDA

PROJECT IMPLEMENTATION (bidding, selection, financing, commissioning, monitoring)

DEVELOPERS EPCs FINANCIERS e.g. e.g. e.g. ■ Azure Power ■ Lanco Infratech ■ Axis Bank ■ Green Infra ■ Mahindra EPC ■ Bank of Baroda LEVEL

PROJECT ■ Kiran ■ Shriram ■ ICICI ■ Mahindra ■ Punj Lloyd ■ State Bank of India ■ Welspun Solar ■ Tata BP Solar ■ U.S. Ex-Im Bank ■ OPIC

MANUFACTURERS (solar PV, balance of system) ■ Domestic: e.g., Moser Baer, PLG Power, Tata BP Solar, Websol, EMMVEE ■ Various international

BROADER ENABLING ENVIRONMENT (infrastructure, policies, industry network)

SUPPORTING RESEARCH AND DEVELOPMENT ENVIRONMENT COMMUNITIES

FIGURE 3: Bundling of Power Scheme: An innovative mechanism to reduce the price burden of solar Websol SOLAR POWER DEVELOPERS NTPC UNALLOCATED POWER PAGE 4 | Laying the Foundation for a Bright Future PV: `17.91unit xkWh 4x kWh `2.5/unit CSP: `15.31/unit

Cost of bundled power to NVVN NVVN PV: (17.91x + 10x)/5x = `5.58/unit CSP: (15.31x + 10x)/5x = `5.06/unit

STATE Cost of Power to State Utilities for UTILITIES 50:50 ratio of PV and CSP = `5.32/unit

Source: See Mission Document, pp. 8-9 Global Investor Summit, “Jawaharlal Nehru National Solar Mission Process, Opportunities & Risk,” presentation by State Bank of India, April 16-18, 2011: renewablemarketsindia.com/attachments/3359_Mr.%20Rajan%20Srinivas.pdf (accessed April 2, 2012).

TABLE 4: A range of private and public institutions have a role in enhancing bankability and overall solar market development

INSTITUTIONAL EXAMPLES ACTUAL/POTENTIAL ROLE Indian Public Sector (non-bank) Financial Intermediaries: Priority sector lending; Concessional loans; Reserve Bank of India; IREDA; Life Insurance Corporation Long-term debt

Non-Financial Supporting Institutions: Solar Energy Corporation of India; Channeling funds; Information provision; Indian Banks’ Association; Solar Energy Centre; BEE; C-WET Skills; R&D; Component certification

Multilateral Funding Channels: International Finance Corporation; Asian Payment guarantees; Capacity building STRATEGIC LEVEL Development Bank; World Bank; Clean Technology Fund; Green Climate Fund (potentially) (esp. due diligence); R&D

Indian Banks: Axis Bank; Bank of Baroda; ICICI; IDBI; Indian Overseas Bank; Debt financing; Non-recourse project finance; State Bank of India Innovative finance (such as IDFs)

Project finance; Support for market upscaling; Non-Bank Financial Institutions: IDFC; Infrastructure Debt Funds Bridging finance gaps

Overseas Funding: US-EXIM; US-OPIC; KfW (Germany); Concessional finance; Long-term debt Multilateral Funding Channels PROJECT LEVEL

Other: Venture Capital; Private Equity (Domestic and Overseas); Market entry support; Market upscaling; R&D Other early stage investors

Fiscal support: NVVN/NTPC (Bundling); CERC (FiT); MNRE Lowering costs; Incentivizing investment; (Payment Guarantee Scheme) Increasing market confidence

Market Mechanisms: Carbon Market (CDM and Voluntary Market); Additional revenue support to incentivize Renewable Energy Certificates investment ANCILLARY MECHANISMS AND MEASURES Other: Bilateral Funding; Private Companies; Educational Institutions; National Skill Development Corporation R&D; Skills development and training

Source: CEEW and NRDC analysis TABLE 2: National Solar Mission Solar Project Process

PROCESS STEP TIMING DESCRIPTION Solicitation Day 1 MNRE and NVVN request bids from project developers. Bidding Day 1 + 30 days Project developer submits bid, which undergoes initial screening to ensure it meets technical criteria. MNRE and NVVN choose technically qualified bids through reverse auction mechanism based on lowest-priced Selection Day 1 + 120 days bids, selecting winning projects until the available MW capacity is allotted. Entering LOI Day 1 + 135 days MNRE and NVVN issue letter of intent (LOI) within 15 days of selection. Signing PPA LOI + 30 days NVVN signs power purchase agreement (PPA) with project developer. Financing PPA + 180 days Project developer secures project financing, typically with financial institution, by financial closure deadline. Project developer must produce solar power by commissioning deadline, paying penalty fees to NVVN for delays Commissioning* PPA + 365 days up to 6 months, at which time PPA is terminated. Monitoring Ongoing NVVN monitors project to ensure that power commitments are met.

* The commissioning responsibility may be transferred to EPC contractors, depending on the terms of the bilateral contracts.

STRATEGIC LEVEL funding channels (e.g., government-promoted funds, multilateral development banks, and public-private Without a policy framework that is transparent, long-term, funds).23 These entities provide different types of and credible, it is unlikely that a nascent industry will attract financial capital (e.g., debt, loan guarantees, and risk the level of investment commensurate with its scale of insurance) to commission the solar plant (often in ambition. This is the most important role for a national-level addition to a developer’s equity contribution).24 mission: bringing together different aspects and various actors in the solar ecosystem under a single umbrella. Thus, the following top-down policies and strategies are being SUPPORTING ENVIRONMENT implemented to create and shape the demand for solar power in India and to promote the growth of the nascent Indian The supporting environment encompasses all other solar industry: players and policies that help facilitate the successful implementation of the solar project. This level includes: n National Solar Mission (see Table 2);20 communities, without whose active engagement and n State policies, which could either complement the involvement the projects risk losing legitimacy or facing Mission or offer alternative policy designs for project challenges during the implementation and operation phases; developers to choose from;21 and accommodating infrastructure, such as available land and n Non-NSM national policies, particularly Renewable access to the grid (including operational substations); and Purchase Obligations (RPOs) and Renewable Energy the following key supporting stakeholders and components: Certificates (RECs).22 n Manufacturers, which provide solar equipment to developers and EPC contractors, and whose solar components or raw materials are either supplied PROJECT LEVEL domestically or imported;25 The overarching strategies translate into particular policy n Research and Development programs, which extend tools at an individual project level. These policy tools govern across the entire solar value chain and cover both the project implementation process, which requires the product and process innovations, from new technologies following key project stakeholders to work in unison: to manufacture, and from installation to power plant 26 n Project developers, who bid for projects under the operation; and NSM and, if successful, are primarily responsible for n Broader enabling government policies, which facilitate commissioning projects on time to supply the committed the creation of a supportive solar environment on both amount of solar-generated electricity into the grid; national and state levels.27 n Engineering, procurement, and construction (EPC) All of these policies and key stakeholders enable India’s solar contractors, implement projects for developers and have market to get off the ground. In subsequent sections, this expertise building projects and understanding the “on- report discusses how these policies and stakeholders have the-ground” challenges affecting project completion; and fared during Phase 1 of the NSM and considers possible n Financiers, including Indian commercial banks, Indian improvements to a suite of policies to facilitate a smoother nonbanking financial institutions, and international roll-out and scaling-up of solar projects.

PAGE 5 | Laying the Foundation for a Bright Future IV. PHASE 1 OF THE NATIONAL SOLAR MISSION: “BUILDING SOLAR INDIA”

The immediate aim of the Mission is to focus on setting up an enabling environment for solar technology penetration in the country both at a centralized and decentralized level. “ — JNNSM Mission Document ”

As the first stage of the Solar Mission, Phase 1 is vital to OFF-GRID SOLAR POWER IN RURAL INDIA creating a solid foundation for India’s solar energy market. OFF-GRID SOLAR POWER IN RURAL INDIA As the Mission Document states, “the ambitious target Through MNRE’s ongoing remote village electrification program, for 2022 of 20,000 MW or more will be dependent on the the NSM aims to provide solar lighting systems to 10,000 villages ‘learning’ of the first two phases, which, if successful, could and hamlets through a 90 percent subsidy. Stand-alone rural solar lead to conditions of grid-competitive solar power.”28 MNRE power plants will also be established. The NSM also retains explicitly built in flexibility so that the Mission’s approach flexibility to consider a 30% capital subsidy to promote solar would evolve in response to lessons learned during the first energy’s innovative applications, like powering school computers phase, contributing to the overall success of the Misson. and milk-chilling plants. Phase 1 aims to ramp up grid-connected solar energy to 1,100 MW by 2013 with 500 MW of PV, 500 MW of As of 2010, 40 percent of India’s population lacked grid- concentrated solar thermal and 100 MW of rooftop PV.29 connected electricity. Now, remote rural villages have an When Phase 1 began, many viewed the Mission’s goals as opportunity to receive economical off-grid solar energy where overly ambitious, especially since India had little solar PV grid penetration is not feasible or cost-effective. and no solar thermal projects in 2010.30 Two-thirds of the way into Phase 1, India’s grid-connected solar energy market Off-grid solar energy’s advantages include: has grown tremendously, with an increased number of n Improved access to energy sources developers, lower prices, and interested financial institutions. India’s solar energy market grew from 17.8 MW in early 2010 n Affordability to 506.9 MW cumulative installed capacity as of March 26, n Adaptability 2012.31 Of this capacity, 203.4 MW was commissioned under n Ease of installation and maintenance the National Solar Mission and other central government schemes. Another 303.5 MW was deployed under initiatives Off-grid solar power is currently a missed opportunity and the of various states. Despite this early success, as Phase 1 enters government, including MNRE, needs to do more to promote off- its final year, the Mission is experiencing the pains and grid applications in rural India. stumbling blocks of fast-paced growth. As Phase 1 concludes, effective government policies, backed by sufficient resources, are essential to creating a robust solar energy market. Looking ahead, Phase 1 offers important lessons for Phase 2.

PAGE 6 | Laying the Foundation for a Bright Future PHASE 1 PROJECT ANALYSIS AND DISCUSSION TABLE 3: National Solar Mission Phase 1 ALLOCATIONS ALLOCATIONS Phase 1 of the Mission has focused largely on grid-connected BATCH UNDER BATCH I UNDER BATCH II projects thus far. To achieve 500 MW of PV and 500 MW SPECIFICATIONS of concentrated solar thermal, the central government (2010 to 2011) (2011 to 2012) conducted two batches of reverse auctions. These bidding 150 MW (PV)a Total capacity of processes offer feed-in tariffs and long-term PPAs to grid-connected solar 470 MW (solar thermal) 350 MW (PV) the selected least-cost developers. The feed-in tariffs to projects selected developers are complemented by support to power utilities 84 MW (migrated) through the bundling of solar power with conventionally 5 MW per project & produced electricity, reducing the average per-unit cost of Maximum size bidder (PV) 20 MW per project (PV) solar power (see Figure 3). allotment 100 MW per project & 50 MW per bidder (PV) bidder (solar thermal) a Two of the 30 PV projects originally awarded under Batch I were canceled due to developers’ inability to meet NVVN criteria.

FIGURE 2: Rajasthan and Gujarat, which are endowed with the highest irradiation, led Phase 1 installations

PV = photovoltaic RAJASTHAN ST = solar thermal Batch 1 UTTAR PRADESH Allocated: PV - 100 MW, ST - 400 MW Batch 1 Allocated: PV - 5 MW Batch 2 Allocated: PV - 295 MW Batch 2 Allocated: N/A

GUJARAT Batch 1 ODISHA Allocated: ST - 20 MW Batch 1 Batch 2 Allocated: PV - 5 MW Allocated: N/A Batch 2 Allocated: N/A

MAHARASHTRA Batch 1 Allocated: PV - 5 MW ANDHRA PRADESH Batch 2 Batch 1 Allocated: PV - 25 MW Allocated: PV - 15 MW, ST - 50 MW Batch 2 Allocated: PV - 20 MW

KARNATAKA Batch 1 TAMIL NADU Allocated: PV - 5 MW Batch 1 Batch 2 Allocated: PV - 5 MW Allocated: N/A Batch 2 Allocated: PV - 10 MW

Source: SolarGIS; Various reports of upcoming solar installations

PAGE 7 | Laying the Foundation for a Bright Future 1. Reverse Auctions: Leveling the Playing Field For both batches of Phase 1, the Indian government used the reverse auction as a price discovery mechanism. Reverse auctions have two main benefits. They allow government procurers to select projects based on lowest cost (thereby keeping the burden on fiscal resources and taxpayers low), and they ensure that a price-based selection process will be transparent and fair. The government made a substantial effort to ensure transparency in Phase 1’s project allocations, since any accusation of corruption in the bidding and project selection process could jeopardize the entire program while still in its infancy. Project developers then bid on discounted tariffs set by the Central Electricity Regulatory Commission (CERC). A 5 MW parcel-size requirement for Batch I and 20 MW maximum parcel-size requirement for Batch II opened the market for a broad range of companies to enter the sector—as long as they met the criteria set out in the guidelines (see “Batch I Selected Project Developers,” below). The government kept project sizes small to encourage more 5 MW grid-connected solar photovoltaic plant jointly developed by entities to take advantage of the opportunity rather than lock SunEdison and Azure Power, installed in Dhama village, Patdi Taluk, Surendranagar, Gujarat.

in a few firms as dominant players at this early stage of the SUNEDISON CREDIT: industry. Some large players participated to diversify their portfolios by investing in solar energy, while some smaller not be commissioned (although, in the first quarter of entrepreneurs made successful bids to capitalize on the 2012, several projects have come on-stream after delays). emerging solar market. Conversely, inadequate vetting and monitoring have also led to While largely praised, the reverse auction has also been accusations that large companies such as Lanco Infratech have criticized. Some conservative stakeholders have disparaged exploited the guidelines and may corner a significant market the reverse auction as driving prices so low that some share of NSM projects.33 projects are “half-baked” in terms of financing and due diligence, resulting in financially unviable projects. The 2. EPC Contractors Emerging as Central Players reverse auction process has also been criticized for not In Phase 1, the EPC contractors have risen as a central force adequately vetting bidders, since the eligibility criteria in the emerging solar energy market. Project developers simply required that bidders have a minimum net worth with limited experience in the solar market have relied of `150 million (about $3 million).32 The resulting selection heavily on their EPC contractors to support their projects of some inexperienced, small developers quoting very with potentially unsustainable bid prices. The role of an aggressive prices has caused fears that many projects may EPC can cut both ways. On one hand, EPCs have experience executing projects, and the more experience they gain, the further marginal costs of installing additional projects BATCH I SELECTED PROJECT DEVELOPERS BATCH I SELECTED PROJECT DEVELOPERS could be reduced. But too much reliance on an EPC can Large and small developers emerged during the bidding process, also blur the distinction between the project developer, who including the following selected Batch I PV awardees: Azure Power, holds ultimate responsibility for producing solar electricity, Rithwik Projects, Saisudhir Energy, Welspun Solar, Coastal Projects and the contractor. Projects should ultimately be selected Limited, Karnataka Power Corporation, Camelot Enterprises, Alex after due diligence on both developers and associated EPC Solar Private, Alex Spectrum Radiation, Bhaskar Green Power, DDE contractors; their separate capabilities and responsibilities Renewable Energy, Electromech Maritech, Finehope Allied Energy, have to be judged on their own merits, and they must be held Greentech Power, Indian Oil Corporation, Khaya Solar Projects, accountable on those terms. The bidding process for Phase Newton Solar, Maharashtra Seamless Limited, Mahindra Solar 1 has delivered on some requirements for transparency, but One, Northwest Energy, Oswal Woollen Mills, Punj Lloyd, Saidham this is an area that needs attention in coming phases. Overseas Private Limited, Viraj Renewables Energy, SunEdison, Vasavi Solar Power, Amrit Energy, CCCL Infrastructures, Electrical Manufacturing Company, and Precision Technik. 3. Market Consolidation Phase 1 is also a mechanism to test and evaluate the Companies awarded Batch I solar thermal projects in Phase 1 performance of project developers, giving experienced included: Megha Engineering, Aurum Renewable Energy, Ispat entities a chance to prove their track record and allowing Alloys, Godawari Power & Ispat, KVK Energy, Rajasthan Sun many domestic and foreign developers to enter the Indian Technique Energy, and Lanco Infratech. solar market. One Indian developer predicted that although the solar energy market had immense growth potential, it

PAGE 8 | Laying the Foundation for a Bright Future was likely to consolidate 8 to 10 primary developers. The Manufacturing, and Enabling Environment sections). The significantly lower number of companies participating in grid-connected solar PV projects selected for Batch I were Batch II bidding, as compared to Batch I, is an early sign of due for completion by January 2012. By early 2012, the such consolidation.34 Indian government had fined 14 PV project developers for The experience of other solar markets, like California, failing to meet their commissioning deadlines and warned suggests that consolidation is a sign of a maturing industry. another 14.38 By late March, 100 MW of PV projects were In India, companies such as Welspun, Azure Power, Mahindra considered commissioned and the remainder were expected Solar, and Lanco Infratech are starting to dominate the solar to be commissioned in April 2012.39 As the Mission moves market. While the Batch II 50-MW limit per project developer forward, compliance with deadlines will be a main focus, remains a low threshold for a growing market, consolidation both to ensure that India actually meets its solar targets of companies is likely to continue as the market matures. and to maintain the credibility of the government’s policies, guidelines, and enforcement capabilities. 4. Interplay Between the NSM Phase 1 and State Projects 2. Batch II Projects: Approaching Grid Parity Clearly, it is not just the National Solar Mission that is driving India’s Batch II reverse auction sent ripples through the solar industry; state-level programs are having an impact international solar markets. The lowest winning bid, by the as well. As Phase 1 bidding was under way, several states French company SolaireDirect, was `7.49/kWh ($0.15/kWh) launched their own solar energy programs. For example, for a 5 MW plant.40 This price was impressively lower than Welspun began new projects under Gujarat’s policy and also many markets had predicted, suggesting that solar energy competed for Karnataka’s allotments. Similarly, Azure Power could attain grid parity with traditional energy sources has a 2 MW solar power plant under operation in Punjab, and sooner than initially anticipated. Current Indian grid power MAHAGENCO is working to commission a 150 MW plant in prices in the top energy-consuming Indian states range from Maharashtra.35 Valuable experience and scale from multiple approximately `3.90/kWh ($0.08/kWh) in Andhra Pradesh projects are giving these bidders the confidence to bid low to `5.90/kWh ($0.12/kWh) in Rajasthan, with a nationwide and yet be profitable. The central government coordinated average of `4.70/kWh ($0.09/kWh).41 Commercial and with several states during Phase 1, but increased coordination industrial power prices are generally higher, making the will be needed given the scale of Phase 2 projects. lowest winning bid of `7.49 ($0.15/kWh) tantalizingly close to the higher-end grid power price—just about `1.60/kWh ($0.03/kWh) short of grid parity and at parity with diesel.42 PHASE 1’S TIERED APPROACH Batch II’s progress toward grid parity was highly praised during stakeholder conversations with the government, The NSM’s phased timeline, divided further into batches industry, and civil society groups. of selected projects, manages the pace of the Mission in a Batch II awarded contracts to 22 companies with 27 total sustainable way while accomplishing interim targets. Both winning bids.43 Welspun Energy, Azure Power, Mahindra, batches of Phase 1 were considered initial successes for the Green Infra and Jakson Power won multiple projects, with Mission, but it is too early to determine whether individual Welspun securing the maximum 50 MW of allotment for a selected projects can claim success. single company. Green Infra and Mahindra secured 40 and 30 MW, respectively. All but three of the winning Batch II bids 1. Batch I Projects: Boosting Solar Energy are for projects located in Rajasthan. The other three are in During the reverse auction process for Batch I, 36 projects Tamil Nadu, Maharashtra, and Andhra Pradesh. were selected, with nearly 400 developers bidding in late While larger companies, such as Reliance, did not 2010.36 A total of 140 MW were allocated to 28 PV projects participate as aggressively as expected during Batch II, and nearly 470 MW to seven solar thermal projects.37 The some of these companies are undertaking big projects Indian government also migrated existing solar projects through state-level programs, such as Reliance’s 40 MW to count toward the Solar Mission, at a premium tariff of Dahanu Power project in Jaisalmer, Rajasthan. The NSM has `17.91/kWh ($0.45/kWh), providing an additional 84 MW of created momentum at both the national and state levels, as capacity. The Indian government started the reverse auction demonstrated by falling prices at the state level. For example, price at `17.91/kWh ($0.45/kWh). The lowest bid price was the Odisha Renewable Energy Development Agency (OREDA) `12/kWh ($0.32/kWh). Since two PV projects failed to meet selected a project with the lowest bidding price in the NVVN requirements, they were withdrawn from the process. country in February 2012.44 Some argue these state-level solar Nineteen of the Batch I PV projects are located in Rajasthan; programs are more profitable than the national program the others are in Gujarat, Maharashtra, Karnataka, Tamil due to higher feed-in tariffs and other state-level incentives. Nadu, Andhra Pradesh, Odisha, and Uttar Pradesh. However, developers typically have more payment certainty Although stakeholders complimented the reverse auction through NVVN under the NSM. for its transparency, major challenges and delays are affecting the commissioning of Batch I projects (see Bankability,

PAGE 9 | Laying the Foundation for a Bright Future Key Findings From Phase 1 n State policies have contributed to boosting solar projects in the past two years, especially in Gujarat and As part of our assessment and analysis, CEEW and NRDC Rajasthan. For Phase 2, the central government needs conducted several individual and group stakeholder to increase collaboration with states to facilitate RPO discussions about experiences from Phase 1 of the Mission. and REC compliance, project bidding, financing, power Stakeholders included central government officials, evacuation, transmission, and land acquisition. developers, domestic banks, international financial and governmental groups, manufacturers, and community n While the domestic content requirement (DCR) has members. In later sections, this report presents in-depth garnered international attention and raised concerns analysis of bankability, manufacturing, and land use. Key among some foreign stakeholders, most developers do findings highlighted by stakeholders during Phase 1 of the not identify it as a major barrier to project development. Mission include: The case for a robust domestic manufacturing base rests on multiple objectives: energy security, technology n The sophistication of solar energy stakeholders development, energy access, ensuring product standards, is increasing. However, a much greater degree of attracting foreign investment, and creating jobs. Even so, coordinated stakeholder action is needed to unleash the many manufacturers expressed the view that the DCR, solar energy market’s potential. as currently structured, is not sufficiently stimulating n As an overarching policy framework, the NSM aims local manufacturing. Manufacturers face other systemic to increase deployed capacity, enforce regulatory limitations, such as poor infrastructure, lack of raw obligations for using renewable energy, create a materials, an undeveloped supply chain, and lack of manufacturing hub in India, and promote R&D for new financing. solar technologies. These objectives will be achieved in n Many developers have faced difficulties in obtaining different time frames and therefore should be correctly clearances to convert land use for solar project prioritized by the central government. development and encountered claims by other parties n Infrastructure, policy, and market conditions are shaping to government-allocated land. In terms of infrastructure, India’s solar market differently from other solar markets. some developers have experienced difficulties with Unique attributes include the prevalence of ground- power evacuation and transmission lines to substations. mounted solar parks, thin film PV technology used in Limited availability of skilled labor also remains a barrier more than half the projects, and low bid prices that make to wide-scale project development. grid parity possible in the near future. n To protect local interests and the environment, n Overall, stakeholders viewed the reverse auction bidding developers and government agencies need to increase process as transparent and successful in driving down community involvement in the decision-making process, prices. However, financial institutions, civil society from project planning to operations. groups, and some developers suggested that in order n All stakeholders agree that while Phase 1 focuses on to draw serious players with an ability to ensure project grid-connected projects, off-grid solar energy provides completion, and attract financing, project selection an even larger opportunity. They state further that criteria should be more rigorous. Moreover, for the stakeholders should work collectively to develop both Mission to remain credible, financial due diligence public and private strategies for large-scale deployment and continuous monitoring are needed to ensure that of off-grid projects. commissioned projects are operational at contracted capacity and generating solar power that is transmitted to the grid. n Indian bankers still perceive significant risks in the solar energy market and are largely hesitant to make substantial investments in solar technologies. International lenders, less risk-averse on the technology front, offer lower interest rates but remain skeptical about project completion. To bolster confidence among financiers, a range of funding channels, financial institutions, and other stakeholders must coordinate at program and project levels and provide ancillary support, such as R&D and skill development, to help the solar market mature.

PAGE 10 | Laying the Foundation for a Bright Future V. BANKABILITY: FINANCING SOLAR ENERGY PROJECTS

Banks are still not well versed in providing loans for solar projects. They need to see a track record of delivery, and as yet there are not enough data for them to make decisions comfortably. “ — Project developer, November 2011 ” India is one of the world’s leading countries in installed n To develop confidence that funds are available to support renewable energy capacity and as a destination for renewable scaling up the Mission; and energy investments. In 2011 alone, approximately `51,000 n To provide support for the overall solar ecosystem, but crore ($10.3 billion)45 was invested in the Indian renewable especially to support the development of manufacturing energy sector, more than one-third of it in solar projects. in India. However, much greater investments are needed to meet India’s full potential. Sufficient and timely mobilization of funds is fundamental to scaling solar energy in India. Despite increased understanding of the solar industry within pockets CURRENT FINANCING ISSUES: PERCEIVING of India’s conservative finance sector, commercial banks MANY TYPES OF RISKS continue to perceive significant risk in solar investments and Financial institutions identify several characteristics of the have not yet embraced solar as a mainstream investment solar industry that are preventing NSM-supported projects opportunity. from securing domestic financing, including these: For Phase 1, project developers were required to achieve n Solar energy is a new sector and technology in India; financial closure within 180 days after signing a PPA with NVVN. Arranging financing for projects from external n High up-front costs result in a longer payback period; sources presented some challenges. Nonetheless, developers n High domestic interest rates make overseas financing achieved their financing goals, accessing domestic and more attractive; and overseas funds and using their own company equity. Equity financing might have helped to meet the relatively n Uncertainty about the payment ability of financially small scale of investment for Phase 1, but it cannot distressed Discoms makes banks reluctant to lend to underwrite the targets for Phase 2. It is estimated that up to solar projects. `100,000 crore ($20 billion)46 will be required to reach Phase 2 implementation targets. Despite high levels of interest 1. New Sector and Technology: India’s solar energy market and invested funds, the challenge is to utilize government- grew from 17.8 MW in early 2010 to more than 506.9 MW 47 supported schemes like the NSM to continue building cumulative installed capacity in March 2012. However, confidence in the market and to facilitate the use of a variety given the early stage of the industry in India, this has not of financing arrangements to meet requirements. Phase 2 will yet translated into a track record of deployment. Banks require an active governmental role to give financial players have expressed discomfort with investing in “unproven the confidence to invest in solar projects. industries” such as solar. Informational gaps and awareness issues exacerbating these perceived risks are Engaging India’s financial sector in the National Solar Mission discussed below. is important for three main reasons: n To help get Phase 1 projects off the ground and send a strong signal about the potential for a broader solar market;

PAGE 11 | Laying the Foundation for a Bright Future LACK OF AWARENESS AND INFORMATION “Non-recourse financing is the preferred TO ADDRESS PERCEIVED RISKS financing structure, where the lending n Banks lack data about the solar market that could institutions would provide debt to a special address these perceived risks. Deficiencies include: purpose vehicle set up for the project, and n Lack of documentation of successful projects’ track records; would have a lien on the project’s cash n Lack of documentation of technological effectiveness; flow. However, as this structure does not n Lack of irradiance data; and

provide recourse to the developers’ balance n Uneven dissemination of information to banks, and sheet, banks require rock solid agreements differing levels of understanding of the solar industry among potential lenders. for revenues from the projects.” 1. Lack of Documentation of Successful Projects’ — State Bank of India official, Business Standard, Track Records: Many stakeholders say that banks are 48 August 2010 uncomfortable investing in a sector (and a technology) that lacks a significant track record in India. Bankers are waiting to see not only whether commissioning deadlines are being met, but also whether performance 2. High Up-front Capital Costs: The up-front capital cost of claims can be achieved. However, data on performance a solar plant means interest rates have a significant impact are either not being generated or not being shared. on a project’s total cost.49 Despite lower recurring costs MNRE is currently testing monitoring software to track (and zero fuel costs), the high up-front capital expenditure project implementation progress through periodic means projects’ financial returns on investments will developer reports.56 Such a program could be used as a extend over a considerable period of time. platform for collecting and sharing non-commercially 3. High Domestic Interest Rates: India’s rapid economic sensitive information with a broader stakeholder base, growth has been coupled with a period of high inflation or at minimum it could be used by MNRE to provide a and interest rates. This contrasts starkly with other major periodic summary of project progress. economies, where central bankers have maintained 2. Lack of Documentation of Technological Effectiveness: very low interest rates to stimulate a weak economic Technologies employed under the NSM are still environment.50 Many local developers seeking domestic considered unproved in India, especially thin film PV funding have criticized the banks’ high average lending technologies. Unlike wind turbines, which are certified rate of 11 to 13 percent annually.51 Batch I developers by the Centre for Wind Energy Technology (C-WET) using imported cells and modules indicated that they in Chennai,57 there is no equivalent certification of had been able to access overseas lines of credit of 9 to 10 solar components. Bankers have raised this issue as percent annually.52 The longer terms offered by overseas another factor that makes them reluctant to lend to solar lenders (ranging from 15 to 18 years,53 compared with developers. approximately 10 years in India54) make foreign funds even more attractive to local developers. These longer- 3. Lack of Irradiance Data: In the first phase of the term loans provide greater certainty to the financier and Mission, developers had to use generic irradiance data the project developer, reduce borrowing costs, and match from sources like NASA. Most bankers do not yet have solar projects’ longer gestation periods for return on confidence that the generation estimations being used investment. will be realized without site-specific irradiance data. Moreover, satellite-generated data must be verified 4. Payment Uncertainty: Financiers we spoke to uniformly against surface measurements, and seasonal variations highlighted the poor financial health of energy- have to be factored in as well to make informed decisions distribution companies (Discoms) as a big risk. This is about site selection. MNRE, along with C-WET, are a system-wide issue, not unique to the solar industry, working to increase irradiance data by developing a and a number of Discoms in India are in a dire financial network of 51 automatic solar resource monitoring position, with combined losses posted in the vicinity stations around the country58 and creating a detailed of `29,000 crore (about $5.6 billion) in the 2009 to10 solar atlas. Solar radiation centers should be operational financial year.55 Although innovative approaches like shortly as well, and MNRE is planning to publish the raw bundling thermal power with solar have reduced the cost data from such centers.59 burden on Discoms for already signed PPAs, uncertainty about the continuity of bundling and payment security schemes continue to plague stakeholders concerned about payments in the future.

PAGE 12 | Laying the Foundation for a Bright Future FIGURE 1: A successful solar ecosystem depends on the effectiveness of various individual enablers and stakeholders and coordination among these

NATIONAL SOLAR MISSION VARIOUS STATE POLICIES NON-NSM NATIONAL e.g. e.g. POLICIES ■ MNRE ■ MOP ■ Gujarat ■ Karnataka e.g. ■ ■ ■ ■ ■ ■ LEVEL NVVN NTPC Rajasthan Tamil Nadu RPOs RECs

STRATEGIC ■ IREDA

PROJECT IMPLEMENTATION (bidding, selection, financing, commissioning, monitoring)

DEVELOPERS EPCs FINANCIERS e.g. e.g. e.g. ■ Azure Power ■ Lanco Infratech ■ Axis Bank ■ Green Infra ■ Mahindra EPC ■ Bank of Baroda LEVEL

PROJECT ■ Kiran ■ Shriram ■ ICICI ■ Mahindra ■ Punj Lloyd ■ State Bank of India ■ Welspun Solar ■ Tata BP Solar ■ U.S. Ex-Im Bank ■ OPIC

MANUFACTURERS (solar PV, balance of system) ■ Domestic: e.g., Moser Baer, PLG Power, Tata BP Solar, Websol, EMMVEE ■ Various international

BROADER ENABLING ENVIRONMENT (infrastructure, policies, industry network)

SUPPORTING RESEARCH AND DEVELOPMENT ENVIRONMENT COMMUNITIES

FIGURE 3: Bundling of Power Scheme: An innovative mechanism to reduce the price burden of solar Websol SOLAR POWER DEVELOPERS NTPC UNALLOCATED POWER 4. Uneven Dissemination of Information: With more financing ecosystem. Although the Mission Document thanPV: `17017.91unit banks and 80,000 branches, xkWh 60 it can be difficult4x kWh to does not explicitly `2.5/unit mention improving the bankability disseminateCSP: `15.31/unit information uniformly through India’s financial of projects, specific aspects of the guidelines offer policy system. Additionally, to mitigate risk on large projects, banks support for finance sector engagement.62 A range of funding often will syndicate loans, with one lead arranger distributing channels, financial institutions, and other stakeholders parts of the debt and the risk.61 This syndication of loans exist in the financial ecosystem that would be relevant Cost of bundled power to NVVN may lead to other banks’ leading solar transactions over for the solar market as well. These financial stakeholders NVVN PV: (17.91x + 10x)/5x = `5.58/unit time. Given the scale of the sector, however, an asymmetry include multilateral funding channels, Indian public and CSP: (15.31x + 10x)/5x = `5.06/unit in levels of understanding of the solar opportunity persists private sector banks, public sector (non-bank) financial among banks. MNRE has facilitated discussions in an effort intermediaries (e.g., IREDA), bilateral funding channels, to increase awareness of and confidence in potential solar venture capital and private equity firms, new market investments. mechanisms, and government fiscal support. But these institutions lack cohesion and information sharing. In order Cost of Power to State Utilities for STATE to increase bankability and overall solar market development, 50:50 ratio of PV and CSP = `5.32/unit MIXED SUPPORT FROM SEVERALUTILITIES SOURCES; the different types of institutions need to be strategically COORDINATION NEEDED coordinated at the program level and project level and in Source: See Mission Document, pp. 8-9 Global Investor Summit, “Jawaharlal Nehru National Solar Mission Process,terms Opportunities of &ancillary Risk,” presentation support measures (see Table 4). Withby State major Bank of India,information April 16-18, 2011: gaps renewablemarketsindia.com/attachments/3359_Mr.%20Rajan%20Srinivas.pdf and potential market failures, (accessed April 2, 2012). financial markets are not likely to warm up to the solar Many of the following current and contemplated regulatory energy sector without strategic interventions to create a programs need improvement or expansion to build

TABLE 4: A range of private and public institutions have a role in enhancing bankability and overall solar market development

INSTITUTIONAL EXAMPLES ACTUAL/POTENTIAL ROLE Indian Public Sector (non-bank) Financial Intermediaries: Priority sector lending; Concessional loans; Reserve Bank of India; IREDA; Life Insurance Corporation Long-term debt

Non-Financial Supporting Institutions: Solar Energy Corporation of India; Channeling funds; Information provision; Indian Banks’ Association; Solar Energy Centre; BEE; C-WET Skills; R&D; Component certification

Multilateral Funding Channels: International Finance Corporation; Asian Payment guarantees; Capacity building STRATEGIC LEVEL Development Bank; World Bank; Clean Technology Fund; Green Climate Fund (potentially) (esp. due diligence); R&D

Indian Banks: Axis Bank; Bank of Baroda; ICICI; IDBI; Indian Overseas Bank; Debt financing; Non-recourse project finance; State Bank of India Innovative finance (such as IDFs)

Project finance; Support for market upscaling; Non-Bank Financial Institutions: IDFC; Infrastructure Debt Funds Bridging finance gaps

Overseas Funding: US-EXIM; US-OPIC; KfW (Germany); Concessional finance; Long-term debt Multilateral Funding Channels PROJECT LEVEL

Other: Venture Capital; Private Equity (Domestic and Overseas); Market entry support; Market upscaling; R&D Other early stage investors

Fiscal support: NVVN/NTPC (Bundling); CERC (FiT); MNRE Lowering costs; Incentivizing investment; (Payment Guarantee Scheme) Increasing market confidence

Market Mechanisms: Carbon Market (CDM and Voluntary Market); Additional revenue support to incentivize Renewable Energy Certificates investment ANCILLARY MECHANISMS AND MEASURES Other: Bilateral Funding; Private Companies; Educational Institutions; National Skill Development Corporation R&D; Skills development and training

PAGE 13 | Laying the Foundation for a Bright Future

Source: CEEW and NRDC analysis 5 MW grid-connected solar photovoltaic plant developed under the NSM by Welspun Solar AP Pvt. Ltd., installed in Pulivendula, YSR Dist., Andhra Pradesh. CREDIT: WELSPUN SOLAR AP CREDIT: confidence and awareness among financial groups, and thereby increase bankability: “The single most important factor n Renewable Purchase Obligations & Renewable Energy driving REC trading is state policy. Unless n Certificates; compliance is enforced on obligated n Priority Sector Lending; entities according to policy mandate, they n Preferential Tariffs; will not buy RECs.”65 n Bundling of Solar Power; n Payment Security Mechanism; — Dr. Jayant Deo, CEO, India Energy Exchange n Clean Technology Fund; n Infrastructure Debt Funds; 2. Priority Sector Lending: Many solar stakeholders n Solar Energy Centre; and advocate for priority sector lending for utility scale solar 66 n Solar Energy Corporation of India. developments to reduce borrowing costs. The Reserve Bank of India has the power to designate certain sectors 1. Renewable Purchase Obligations & Renewable Energy as priority sectors for lending, toward which domestic Certificates: Most stakeholders are enthusiastic about banks must channel 40 percent of their net bank credit the benefits to the solar industry from wider renewable and foreign banks must channel 32 percent.67 One energy policy initiatives such as RPOs and the REC challenge is that even among priority sectors, solar market.63 Because renewable resource distribution is projects will have to compete with other industries. unequal across India, a system for trading RECs has been 3. Preferential Tariffs: CERC set a preferential tariff implemented to allow state “obligated entities” to meet for solar for both batches of Phase 1 to encourage 64 RPOs. Strong enforcement of RPOs will be fundamental sector involvement and set benchmark returns for to the success of the REC market and, in turn, will lower investors. The reverse auction mechanism led to a well- the costs of implementing solar projects. However, many documented discount to the published tariff. Some stakeholders question whether state-level regulators will stakeholders feel that such aggressive bidding eroded the have the appetite to further burden already financially perception of governmental regulatory support offered to stressed Discoms through strict enforcement and ensure reasonable returns in a new sector, but most agree whether REC prices will be sustained in the long term. that the preferential tariff sets a price point from which market participants can establish their approach.

PAGE 14 | Laying the Foundation for a Bright Future FIGURE 1: A successful solar ecosystem depends on the effectiveness of various individual enablers and stakeholders and coordination among these

NATIONAL SOLAR MISSION VARIOUS STATE POLICIES NON-NSM NATIONAL e.g. e.g. POLICIES ■ MNRE ■ MOP ■ Gujarat ■ Karnataka e.g. ■ ■ ■ ■ ■ ■ LEVEL NVVN NTPC Rajasthan Tamil Nadu RPOs RECs

STRATEGIC ■ IREDA

PROJECT IMPLEMENTATION (bidding, selection, financing, commissioning, monitoring)

DEVELOPERS EPCs FINANCIERS e.g. e.g. e.g. ■ Azure Power ■ Lanco Infratech ■ Axis Bank ■ Green Infra ■ Mahindra EPC ■ Bank of Baroda LEVEL

PROJECT ■ Kiran ■ Shriram ■ ICICI ■ Mahindra ■ Punj Lloyd ■ State Bank of India ■ Welspun Solar ■ Tata BP Solar ■ U.S. Ex-Im Bank ■ OPIC

MANUFACTURERS (solar PV, balance of system) ■ Domestic: e.g., Moser Baer, PLG Power, Tata BP Solar, Websol, EMMVEE ■ Various international

BROADER ENABLING ENVIRONMENT (infrastructure, policies, industry network)

SUPPORTING RESEARCH AND DEVELOPMENT ENVIRONMENT COMMUNITIES

FIGURE 3: Bundling of Power Scheme: An innovative mechanism to reduce the price burden of solar NVVN hasWebsol been designated as the SOLAR POWER DEVELOPERS NTPC UNALLOCATED POWER nodal agency by the Ministry of Power to purchase and sell power during Phase 1 of the NSM. NVVN buys the PV: `17.91unit xkWh 4x kWh `2.5/unit solar power at a preferential tariff of CSP: `15.31/unit `15.39/kWh ($0.30/kWh) from the solar PV power plant developers through a Power Purchase Agreement Cost of bundled power to NVVN (PPA). NVVN is authorized to bundle up to 1,000 MW of grid-connected PV: (17.91x + 10x)/5x = `5.58/unit NVVN solar power with conventional power. CSP: (15.31x + 10x)/5x = `5.06/unit NVVN is allocated four times as much MW capacity from the cheaper unallocated quota of thermal power from NTPC coal stations to bundle together with the more expensive STATE Cost of Power to State Utilities for solar power. This bundled power is provided to state utilities at rates UTILITIES 50:50 ratio of PV and CSP = `5.32/unit determined by CERC. These state utilities can use the solar part of the Source: See Mission Document, pp. 8-9 Global Investor Summit, “Jawaharlal Nehru National Solar Mission Process, Opportunities & Risk,” presentation by State Bank of India, April 16-18, 2011: renewablemarketsindia.com/attachments/3359_Mr.%20Rajan%20Srinivas.pdf (accessed April 2, 2012). bundled power to meet their RPOs.

4. Bundling of Solar Power: NVVN and MNRE’s bundling 7. Infrastructure Debt Funds: In July 2011, the government of solar power with unallocated conventional power to announced the creation of Infrastructure Debt Funds.72 reduce the potential financial burden on Discoms and Most bankers with whom we consulted feel very positive TABLEconsumers 4: A range has been of privatewell received and publicby stakeholders. institutions The have a roleabout in enhancingthe funds since bankability their mandate and overall would be to increase solarNTPC market has access development to a pool of unallocated coal, which will the flow of long-term debt in infrastructure projects. be bundled with solar at a ratio of 4:1. With a bundled Banks are reaching (or have reached) their power sector unit of power costing aboutINSTITUTIONAL `5.32/kWh EXAMPLES ($0.10/kWh), the lending limits, and the ACTUAL/POTENTIALcreation of infrastructure ROLE funds DiscomsIndian can Public meet Sector their RPOs (non-bank) without Financial being burdenedIntermediaries: will allow for solarPriority sector sector investment lending; Concessional without banks’ loans; 68 73 with aReserve high-priced Bank of powerIndia; IREDA; source. Life Insurance Corporation exceeding their Long-termsector exposure debt limits. The objective 5. Payment Security Mechanism: The Mission established is also to develop a secondary bond market that could permit further refinancing of bank loans. an `486Non-Financial crore ($98 million)Supporting Payment Institutions: Security Solar Mechanism Energy Corporation of India; Channeling funds; Information provision; (PSM)Indian to cover Banks’ nonpayment Association; Solarof PPAs Energy by Discoms.Centre; BEE;69 TheC-WET 8. Solar Energy Centre:Skills; R&D;MNRE Component established certification the Solar Energy PSM garnered a variety of stakeholder reactions. Some Centre in 1982 as a hub for developing solar technologies. feel thatMultilateral the fund Funding is inadequate Channels: for Internationalits purpose Finance because Corporation; AsianBankers note thePayment need for guarantees; a common Capacity platform building where STRATEGIC LEVEL of unclearDevelopment processes, Bank; procedures,World Bank; Clean and Technology requirements. Fund; Green Climate Fundthey (potentially) can access (esp.information due diligence); on project R&D implementation Others have a high level of comfort with the fund since and performance and interact with project developers on it hasIndian a well-estimated Banks: Axis levelBank; ofBank potential of Baroda; default ICICI; andIDBI; aIndian Overseasan Bank; ongoing basis.Debt Although financing; solar-related Non-recourse conferencesproject finance; are well-structuredState Bank of tiered India approach to dealing with payment increasing, domesticInnovative bank finance engagement (such as IDFs) is still considered default. However, stakeholders identified the mechanism’s lacking by solar players. This Centre is underutilized current lack of long-term certainty as a major concern. as a potential resource to train and inform finance Project finance; Support for market upscaling; Non-Bank Financial Institutions: IDFC; Infrastructure Debt Funds professionals on various aspects of solar technology. 6. Clean Technology Fund: The Government of India is Bridging finance gaps seeking approximately `3683 crore70 ($750 million) from 9. Solar Energy Corporation of India: With an initial the CleanOverseas Technology Funding: Fund US-EXIM; (CTF), US-OPIC; an international KfW (Germany); capital of `2000 crore ($403 million), the newly created Concessional finance; Long-term debt fund Multilateralmanaged byFunding the World Channels Bank. Stakeholders have Solar Energy Corporation of India (SECI) will increasingly identifiedPROJECT LEVEL the following three areas where the CTF could take over NVVN’s responsibilities and channel funds be transformative in support of the NSM:71 provided by multilateral institutions such as the Other: Venture Capital; Private Equity (Domestic and Overseas); Asian DevelopmentMarket Bank. entry Stakeholders support; Market name upscaling; SECI R&D n LoweringOther early the stage cost investors of financing and facilitating technology transfer in establishing solar parks; as potentially bringing together various fragmented components of the solar ecosystem to form the basis of n FundingFiscal new support: and innovative NVVN/NTPC technologies (Bundling); CERC lacking (FiT); MNRE Lowering costs; Incentivizing investment; financing under Phase 1; and an ongoing feedback loop to MNRE so that the latter may (Payment Guarantee Scheme) use such inputs Increasingto revise policies.market confidence74 n Contributing to a concessional financing pool for NSM PhaseMarket 1 Mechanisms: and Phase 2 projectsCarbon Market under (CDM 300 and MW, Voluntary to Market); Additional revenue support to incentivize help overcomeRenewable highEnergy up-front Certificates capital costs and lack of investment access to long-term credit at attractive rates. ANCILLARY MECHANISMS AND MEASURES Other: Bilateral Funding; Private Companies; Educational Institutions; PAGE 15 | Laying the Foundation for a Bright Future National Skill Development Corporation R&D; Skills development and training

Source: CEEW and NRDC analysis Key Findings easily implemented. In addition to these recommendations, the government needs to continue innovating at a systemic Based on research and stakeholder discussions, we have level to reduce the high cost of finance in India. Based formulated five key findings on bankability: on research and discussions with stakeholders, we have 1. India’s high interest rates impede project development, formulated five key recommendations on bankability: especially as the costs of solar plants are largely in up- 1. Regulators should diligently enforce RPO mandates and front capital. Overseas financing is more attractive, both the REC market. National and state agencies should for lower interest rates and for longer-term debt, which work together closely to ensure effective RPO and REC match the longer payback period of solar loans. systems. 2. Banks have a low comfort level with solar investments 2. With the Reserve Bank of India and the Ministry of because of the lack of information available, and need Finance, MNRE should encourage priority sector lending more data and statistics on project development, for large-scale solar projects to help reduce lending deployment, and performance. They also need irradiance rates to as low as 10 percent and to provide higher measurements from local settings, which are currently employment potential for downstream solar activities. not recorded. 3. To provide longer-term debt, the government should 3. Financial institutions perceive solar energy in India as enhance funding mechanisms, including the proposed a riskier investment because it is a fledgling industry Infrastructure Debt Funds. To further reassure financiers, without a proven track record in meeting commissioning MNRE should share information on the payment deadlines, performance benchmarks, and delivering security mechanism (PSM) and clarify how the PSM has power. been calculated to effectively cover potential default on 4. RECs represent an opportunity to support the payment. solar market, but regulators need to strengthen the 4. Government agencies and private groups should provide mechanisms for trading and enforcement since solar resource and project deployment data as soon uncertainty about enforcement diminishes investor as they become available. MNRE and the Solar Energy confidence. Corporation of India (SECI) should work with developers 5. Capacity building and networking among banks and to establish monitoring and reporting processes that can other financial intermediaries are needed to increase be implemented before Phase 2. SECI should become a information sharing and awareness within the financial central clearinghouse for all information dissemination community. MNRE has initiated activities toward relating to the solar ecosystem. A sharing platform awareness building and information dissemination, but for improved irradiance data should be created to much more can be done. disseminate information as it is generated. 5. The Solar Advisory Panel and leading financial Key Recommendations institutions should create a network of solar finance The banking sector needs a cohesive approach to reduce risk leaders to develop bank products that support solar perception in what is still considered a nascent market. A energy. Such a network could work together to syndicate number of actions can be taken to help improve bankability loans, share information, and conduct workshops where of projects and improve financial sector engagement. Some bankers, developers, manufacturers, and EPC entities can actions will require significant lead time, such as policy come together to exchange knowledge and experiences amendments to address high interest rates, while awareness- about solar investments. building and information-sharing activities can be more

PAGE 16 | Laying the Foundation for a Bright Future VI. MANUFACTURING: SUPPORTING A DOMESTIC INDUSTRY

[ T]he vast majority of these [solar] jobs are in finance, services, and installation—not manufacturing. Solar simply doesn’t provide a lot of “ manufacturing jobs in any country, and the number is dwindling further with automation. — Prof. Daniel Kammen, University of California, Berkeley75 A productive solar manufacturing base” to provide domestic long-term strategic value for India. To be a dominant player solar components is an important part of India’s aspirations in the global arena, India needs to make prompt, smart, and to become a major global solar player. The Mission aims to concerted investments in manufacturing. establish India as a solar manufacturing hub, to feed both Domestic solar manufacturing can also accelerate the a growing domestic industry as well as global markets. The march toward grid-parity in India. Local manufacturing using NSM, while leveraging other government policies, looks to inexpensive local labor and reduced transportation costs provide favorable regulatory and policy conditions to develop due to shorter shipping distances can lower the final cost domestic manufacturing of low-cost solar technologies, with of local components.78 A May 2011 KPMG report projected the support of significant capital investment and technical that grid parity for utility-scale solar (PV and solar thermal) innovation.76 could be achieved between 2017 and 2020.79 Since then, Batch II bidding has driven the lowest bids to about `8/ kWh80 ($0.16/kWh), which is `2 to 3/kWh ($.04-.06/kWh) MANUFACTURING AMBITIONS: ISSUES AND lower than the projections for 2011 to 2012.81 In the short OPPORTUNITIES term, many stakeholders believe that building up domestic manufacturing by attracting foreign companies would invite Prior to the NSM, Indian manufacturing of solar components advanced foreign technologies—thus augmenting domestic was primarily export-dependent, with about 70 percent of R&D efforts—and would significantly increase foreign direct cells and 80 percent of modules exported to Europe, the investment. United States, Japan, and Australia.77 The overall Indian Domestic manufacturing also provides a more flexible solar market has grown significantly since the Mission’s route to developing a sustainable domestic market. The announcement in January 2010, and while this growth is greater the value chain participation by domestic players, positively influencing domestic production, manufacturing- the larger the amount of value that will be captured by related concerns remain. Discussion of such issues can be the domestic market (rather than flowing overseas). divided into the following three categories: Domestic manufacturing could also offer technical n Strategic benefits of a strong domestic solar flexibility so that factories can be retooled to manufacture manufacturing base within the broader solar ecosystem; a different product more suited to prevailing or emerging 82 n Contextual analysis of the role manufacturing plays in circumstances. Because heavy manufacturing investments 83 job and value creation within India; and can lock in technologies, policies should enable market- based approaches that can efficiently target favorable n Domestic manufacturing issues within the Indian context. technologies.84 Many stakeholders, particularly manufacturers considering setting up Indian operations and developers planning BENEFITS OF A STRONG DOMESTIC SOLAR projects and future expansion, believe India’s lack of a long- MANUFACTURING BASE term, comprehensive, and practical solar plan is a major Solar manufacturing offers India a long-term opportunity hurdle. While the NSM deserves much credit for laying the to be a major global manufacturing nation, an avenue to groundwork, widespread market uncertainty permeates achieve grid-parity with fossil fuel power generation, and the solar ecosystem, negatively affecting investments in greater flexibility to achieve a sustainable solar industry. manufacturing capacity. Therefore, investing in solar manufacturing now can provide

PAGE 17 | Laying the Foundation for a Bright Future INTERNATIONAL CONTEXT INTERNATIONAL CONTEXT Some countries are supporting their domestic markets to incentivize local solar manufacturing, for example: Germany: To support its economy, Germany provides incentives to establish industrial facilities in its eastern region as well as support nationwide deployment.85 United States: To support its economy, the United States has provided manufacturing tax credits to companies producing clean technologies and is funding a number of programs through various federal agencies to support innovative manufacturing, including solar.86 China: To support its export-oriented economy, China provides low-cost financing and currency pegging.87

ROLE OF MANUFACTURING IN JOB AND For the Indian market, MNRE suggests approximately 50 VALUE CREATION percent of the value chain can be attributed to solar cells and modules.96 Yet, anecdotal evidence from Reliance’s 40- Although solar manufacturing has the potential to generate MW Dahanu solar PV project97 suggests that the PV value jobs and create value for India, our analysis indicates that breakdown under Indian conditions is roughly consistent manufacturing is not the sole, optimal route for short-term with global estimates. In any case, significant value creation job and value creation. It also has associated environmental lies downstream of manufacturing. costs. Most important, the majority of jobs in the solar value Since half or more of the value could be captured through chain are not in manufacturing (see Table 5). At least 50 activities downstream, primarily targeting resource-intensive percent of jobs lie downstream of module manufacture—in and investment-intensive manufacturing activities upstream system design, integration, installation, operations, and is not optimal, especially at the outset. Focusing sufficient 88 maintenance. These jobs are also locally bound. and complementary NSM efforts on the “low-hanging fruit”

TABLE 5: Distribution of Jobs Across Solar Value Chain

DATA SOURCE MANUFACTURING INSTALLATION SALES OTHER

EPIA/Greenpeace89 (global average for 2010 to 2020) 25-40% 60-70% up to 5%

Institute for Sustainable Futures90 (global average for 2008) 24% 76%

Solar Foundation91 (U.S. average for 2010 to 2011) 15% 55% 26% 4%

In mature markets, value creation is also not concentrated downstream may be more lucrative from both jobs and value in manufacturing.92 Based on U.S. data, about 30 percent93 of creation perspectives in the short term. The full benefits of the value along the silicon PV value chain is attributable to manufacturing require more time to take effect. cells and modules (roughly 20 and 10 percent, respectively). The entire solar manufacturing supply chain, The remaining 70 percent of value lies downstream, in but particularly upstream solar manufacturing, has inverters, balance of system, mounting, site preparation, environmental costs through its use of chemicals that are labor, and other needs such as engineering, permitting, legal often carcinogenic and toxic.98 Additionally, upstream processes, financing, and distribution (see Figure 4).94 In the PV manufacturing (especially silicon) is highly energy- thin film sector, modules account for about 40 percent of intensive.99 Robust environmental policy and safeguards are the value, while the remaining 60 percent lies downstream.95 needed to safely expand manufacturing in India.

PAGE 18 | Laying the Foundation for a Bright Future FIGURE 5: The mix of PV technologies deployed in the Indian market is markedly different from the mix deployed globally

GLOBAL: PV INSTALLATIONS INDIA: PV INSTALLATIONS Cumulative 2010 TO 2011 2010, 2011 (total ~67,000 MW) (total ~44,000 MW) (total ~325 MW) Thin film Silicon 14% 14% 55% 45% 86% 86%

Batch 1* (total 140 MW) Batch 2** (total 185 MW)

The trend toward thin film PV in India has likely been caused by: 41% ■ Unintended consequences of the 50% 50% 59% Domestic Content Requirement (DCR) ■ Greater access of thin film technologies to lower-cost financing DCR for silicon modules only DCR for silicon modules & cells

*Based on information on 28 Batch I PV projects totaling 140 MW, as of January 2012, obtained from NVVN. **Based on a subset of 9 PV Batch II projects totaling 185 MW from publicly available information and NRDC/CEEW conversations with developers as of February 2012. Note that developers can change technology until MNRE deadlines.

Sources: MNRE 5 Year Plan; GBI Research; PV News and GTM Research May 2011; European Photovoltaic Industry Association 2011; Down to Earth, “National Solar Mission: bidders quote low tariff, bag projects” Dec. 7, 2011: http://www.downtoearth.org.in/content/national-solar-mission-bidders-quote-low-tariff-bag-projects; Hindu Business Line, “GAIL, Mahindra, Welspun to develop solar PV projects” Jan. 2, 2012: http://www.thehindubusinessline.com/companies/article2769056.ece; Hindu Business Line, “Solar mission: We wanted to send out a message, says Solairedirect” Dec. 7, 2011: http://www.thehindubusinessline.com/companies/article2695432.ece; The Economic Times, “Welspun Solar”: http://economictimes.indiatimes.com/topic/Welspun-Solar; Energy Alternatives India: http://www.eai.in/.

FIGURE 4: More than half the jobs and value generated lie downstream of modules

Silicon PV value distribution* 7.00 6.36 6.00

5.00

4.00 ~70% $ / W of value 3.00

2.00

~30% 1.00 of value - Polysilicon Wafer Cell Module Inverter Other Installation

Silicon ingots Wafers Cells Modules Balance of system Installations

15% TO 40% JOBS IN MANUFACTURING 60% TO 85% JOBS IN DESIGN, INSTALLATION, SALES, OTHER

*Based on unsubsidized value chain analysis of U.S. silicon PV market. Roughly similar value distribution for thin film technologies.

Source: GTM Research prepared for Solar Energy Industries Association (U.S.A), “U.S. Solar Energy Trade Assessment 2011: Trade Flows and Domestic Content for Solar Energy-Related Goods and Services in the United States.”August 2011; European Photovoltaic Industry Association and Greenpeace, “Solar Generation: Solar Electricity for Over One Billion People and Two Million Jobs by 2020” Sept 2006;EPIA, Greenpeace. “Solar Generation 6: Solar Photovoltaic Electricity Empowering the World.” 2011; Rutovitz, J. and Atherton, A., Institute for Sustainable Future, University of Technology Sydney, “Energy Sector Jobs to 2030: A Global Analysis” 2009; The Solar Foundation. “National Solar Jobs Census 2011.” 2011.

DOMESTIC MANUFACTURING ISSUES IN manufacturing, with their respective governments THE INDIAN CONTEXT heavily investing in the industry since the early 2000s. This early action has allowed these nations to capitalize A range of systemic issues are affecting domestic on the enormous growth in the solar market: China is manufacturing in India. The Indian solar manufacturing now the largest producer of solar equipment, with 60 industry is not yet globally competitive in cost, quality, or percent of global solar panel production capacity,100 product availability, hindering its further growth, especially 101 in the absence of targeted assistance. Stakeholders identify and Taiwan is the world’s second-largest (see Table 6). several challenges, including these: There is a downside, however. Both the Chinese and Taiwanese industries are extremely export-dependent 1. The burgeoning Indian manufacturing market is less (China exports 95 percent of its module production) and technologically developed than other manufacturing are now facing overcapacity problems.102 countries. 2. Smaller Scale: Solar manufacturing in India lags behind 2. Indian manufacturing is smaller in scale and more the rest of the world. The less-developed and smaller size fragmented, leading to higher costs. of the country’s solar manufacturing industry limits its 3. Such small-scale manufacturing also leads to lower- ability to achieve economies at a scale typically observed quality products. globally.103 Module manufacturing lines globally produce around 75 MW of capacity. Such a large scale allows 4. Indian manufacturing is narrowly focused on only parts bargaining power for procuring raw materials and the of the value chain, mainly midstream. option of increasing production without constantly 1. Less Technological Development: Countries like China incurring investment costs for line expansions.104 and Taiwan are many years ahead of India in solar However, in India, module lines are only 10 to 20 MW,

PAGE 19 | Laying the Foundation for a Bright Future forcing companies that wish to raise production to India, not by Indian companies per se. Our analysis of the frequently make production line investments that result DCR covers: 105 in a higher price per watt. 1. Stakeholder reactions to the DCR; 3. Lower Quality: Developers and EPC contractors consider 2. An emerging bias for thin film technologies due to the Indian products available for domestic consumption DCR exception; to be of lower quality compared with products from countries such as Germany. As one EPC contractor said, 3. Why the DCR’s focus on upstream manufacturing may “It is just like [Indian] consumers preferring an imported not be optimal; and refrigerator or air conditioner to a domestic one.”106 Also, 4. Proposed modifications to the DCR to address these some stakeholders feel that Indian products offer less unintended effects. value for money than comparable Chinese products. For example, one developer said, “Chinese products are 1. Stakeholder Reactions to the DCR so [inexpensive] that you can throw [one] away when it Many solar industry players, particularly in India, have breaks and buy anew.” praised the NSM’s DCR as transparent and necessary. 4. Narrow Scope: In addition to the smaller scale, They believe that this opportunity for India to become many developers feel that the Indian solar industry a major player in the solar field depends on strong currently is narrow in scope, focusing only on pieces support for local manufacturing. Otherwise, with many of the solar supply chain, thus hampering attempts established foreign players currently dominating the field to achieve economies of scale. While India has many with cheap cells and modules, there will be little incentive cell and module manufacturers, there is a dearth of to manufacture these solar components in India. Some producers of raw materials,107 inverters, and balance of fear that without a DCR, India will not be able to achieve system components. As one developer put it, “Indian the Mission’s goal of creating a local solar market while manufacturers can only optimize on production reducing dependence on foreign imports. yields.” The industry is now taking steps toward greater self-sufficiency.108

TABLE 6: Country Comparisons of Solar Manufacturing Policies, Production, and Capacity

SOLAR MANUFACTURING SOLAR MANUFACTURING COUNTRY START OF MAJOR SOLAR INDUSTRY SUPPORT PRODUCTION IN 2010 (MW)109 CAPACITY IN 2010 (MW) China 2005 (Renewable Energy Law)110 13,018 17,500—20,000111

Taiwan Before 2001(MOEA)112 3,449 27,200113

Germany 1999 (EEG)114 2,656 3,050115

United States 1975 (in response to oil crisis)116 1,253 1,333117

India 2010 (NSM) 470 2,000118

DOMESTIC CONTENT REQUIREMENT’S In contrast, other stakeholders criticize the DCR as EFFECTS ON MANUFACTURING being responsible for unaffordable projects that are then unable to achieve scale. These stakeholders believe that The domestic content requirement (DCR) is turning out to be the DCR is driving up project costs by prohibiting access one of the Mission’s hot-button elements, garnering a wide to cheap solar components and technology abroad, 119 spectrum of stakeholder reactions varying from high praise thereby creating an uneconomical rate of return. They 120 to hostility. Although the initial Mission Document did not fear the lower economic viability of the NSM silicon mention a DCR, the subsequent Mission Guidelines for both PV projects may slow the rate of solar installations Phase 1 batches have included a local content requirement to initially, until the infrastructure for local manufacturing promote the Mission’s goal of creating a solar manufacturing is established, and believe it undermines the Mission’s 121 industry. The Mission Guidelines for Phase 1’s Batch I goal of low-cost solar power. An inability to commission required that crystalline silicon modules be manufactured affordable solar projects in the short term may keep the in India, and this requirement was extended to silicon PV NSM from achieving its megawatt targets. Additionally, 122 cells and modules for Batch II. Thin film technologies are some stakeholders believe that if India were to impose currently exempted from the DCR and do not have to be a DCR on silicon wafers and ingots soon, the domestic 123 manufactured domestically. The DCR requires only that manufacturing industry would likely fail to scale up crystalline silicon components be manufactured within quickly and inexpensively enough to serve the demand.

PAGE 20 | Laying the Foundation for a Bright Future FIGURE 5: The mix of PV technologies deployed in the Indian market is markedly different from the mix deployed globally

GLOBAL: PV INSTALLATIONS INDIA: PV INSTALLATIONS Cumulative 2010 TO 2011 2010, 2011 (total ~67,000 MW) (total ~44,000 MW) (total ~325 MW) Thin film Silicon 14% 14% 55% 45% 86% 86%

Batch 1* (total 140 MW) Batch 2** (total 185 MW)

The trend toward thin film PV in India has likely been caused by: 41% ■ Unintended consequences of the 50% 50% 59% Domestic Content Requirement (DCR) ■ Greater access of thin film technologies to lower-cost financing DCR for silicon modules only DCR for silicon modules & cells

*Based on information on 28 Batch I PV projects totaling 140 MW, as of January 2012, obtained from NVVN. **Based on a subset of 9 PV Batch II projects totaling 185 MW from publicly available information and NRDC/CEEW conversations with developers as of February 2012. Note that developers can change technology until MNRE deadlines.

Sources: MNRE 5 Year Plan; GBI Research; PV News and GTM Research May 2011; European Photovoltaic Industry Association 2011; Down to Earth, “National Solar Mission: bidders quote low tariff, bag projects” Dec. 7, 2011: http://www.downtoearth.org.in/content/national-solar-mission-bidders-quote-low-tariff-bag-projects; Hindu Business Line, “GAIL, Mahindra, Welspun to develop TABLE 6: Country Comparisons of Solar Manufacturing Policies, Production, and Capacity solar PV projects” Jan. 2, 2012: http://www.thehindubusinessline.com/companies/article2769056.ece; Hindu Business Line, “Solar mission: We wanted to send out a message, says Solairedirect” Dec. 7, 2011: http://www.thehindubusinessline.com/companies/article2695432.ece; The Economic Times, “Welspun Solar”: http://economictimes.indiatimes.com/topic/Welspun-Solar; SOLAR MANUFACTURING SOLAR MANUFACTURING Energy Alternatives India: http://www.eai.in/. COUNTRY START OF MAJOR SOLAR INDUSTRY SUPPORT PRODUCTION IN 2010 (MW)109 CAPACITY IN 2010 (MW)

China 2005 (Renewable Energy Law)110 13,018 17,500—20,000111 The global solar market does not reflect this thin film trend. Thin film deployment both cumulatively and in Taiwan Before 2001(MOEA)112 3,449 27,200113 “It’s a disaster in the making. I’m feeling the past two years has been approximately 14 percent of total PV deployment globally.125 In contrast, thin film Germany 1999 (EEG)114 2,656 3,050115 a bit of anguish because we want solar to technology had been used for more than 70 percent of 126 United States 1975 (in response to oil crisis)116 1,253 1,333117 succeed, but we need fair competition.” all installations through November 2011. The most recent data available from NVVN indicates that thin FIGURE 4: More than half the jobs and value generated lie downstream of modules India 2010 (NSM) 470 2,000118 — K. Subramanya, CEO, Tata BP Solar124 film technology will be used in about 50 percent of Silicon PV value distribution* approximately 140 MW to go online by 2012 under the 127 7.00 NSM’s first batch of projects. A similar bias is expected in the second batch (based on available 6.36 information for a 2. Emerging Bias for Thin Film Technologies subset of projects) (see Figure 5). 6.00 Many stakeholders believe that, contrary to its intentions, the DCR is creating an uneven playing field Unfortunately, the Indian thin film bias appears to 5.00 and has helped propagate significant overcapacity in the have caused significant overproduction of local silicon domestic silicon PV manufacturing industry. Since thin PV, about 80 percent of manufacturing capacity.128 Our 4.00 ~70% $ / W discussions with manufacturers reveal that silicon- film PV technologies are exempted from the current local of value based manufacturers have failed to benefit from the 3.00 manufacturing requirement, many solar players believe the DCR is not creating the right conditions for domestic DCR despite robust and growing market demand for PV components.129 In the Indian market overall, low- 2.00 manufacturing in India. cost Chinese imports and thin film backed by low-cost Two factors are leading to a thin film bias for NSM PV international financing are dominating orders.~30%130 The 1.00 projects. First, developers have greater access to low-cost DCR as designed and implemented appears toof have value been international financing for thin film technology due to largely ineffectual to date.131 - export requirements. Second, the DCR exemption for thin film importsPolysilicon is leading W toafer lower moduleCell costsModule than Inverter Other Installation domestically manufactured crystalline modules.

PAGE 21 | Laying the Foundation for a Bright Future

Silicon ingots Wafers Cells Modules Balance of system Installations

15% TO 40% JOBS IN MANUFACTURING 60% TO 85% JOBS IN DESIGN, INSTALLATION, SALES, OTHER

*Based on unsubsidized value chain analysis of U.S. silicon PV market. Roughly similar value distribution for thin film technologies.

Source: GTM Research prepared for Solar Energy Industries Association (U.S.A), “U.S. Solar Energy Trade Assessment 2011: Trade Flows and Domestic Content for Solar Energy-Related Goods and Services in the United States.”August 2011; European Photovoltaic Industry Association and Greenpeace, “Solar Generation: Solar Electricity for Over One Billion People and Two Million Jobs by 2020” Sept 2006;EPIA, Greenpeace. “Solar Generation 6: Solar Photovoltaic Electricity Empowering the World.” 2011; Rutovitz, J. and Atherton, A., Institute for Sustainable Future, University of Technology Sydney, “Energy Sector Jobs to 2030: A Global Analysis” 2009; The Solar Foundation. “National Solar Jobs Census 2011.” 2011. center of the supply chain and at the divide between “As implemented, this protectionism has technology-intensive steps upstream and labor- so far merely distorted the market in favor intensive steps downstream, could serve as a catalyst to further domestic development of the industry. In other of thin film.” words, if a domestic module manufacturing industry is established, market players can more readily choose 132 — Alan Rosling, Founder, Kiran Energy to venture into downstream service-based activities or vertically integrate into upstream manufacturing. Additionally, there is potential for developing 3. DCR’s Focus on Upstream Manufacturing manufacturing capabilities in ancillary industries, such Since more than half of the value and solar-related jobs as balance of system equipment. are created downstream of module manufacturing, Finally, as the Mission Document outlines, government the DCR’s current sole focus on cell and module incentives should ideally be technology-neutral, manufacturing is not the best way to maximize job and particularly as the solar industry continues to evolve.133 value creation. Many solar players we spoke to want a Policies should remain flexible to avoid locking the policy that also focuses on downstream activities. This country into a legacy technology that cannot respond to could increase the Mission’s employment-generation advances in the industry.134 potential and boost the captured value for solar PV significantly. The NSM, in its quest for manufacturing, 4. Proposed Modifications to the DCR must not overlook the enormous jobs and value As a policy instrument, tailored domestic content generation potential of the services-oriented sections of requirements have had modest success in other the value chain, downstream from modules. A healthy countries (see Table 7), and a suitably tailored DCR domestic module manufacturing industry, at the

TABLE 7: Domestic content requirements or incentives have had some success globally

CHINA ONTARIO, CANADA U.S. ITALY Stipulation National Development and Ontario Power Authority Feed- American Recovery and Reinvestment Act Quarto Conto Energia vehicle Reform Commission Order 1204 in-Tariff Program Rules (ARRA), “Buy American” Provisions (the Fourth Energy Plan)

Launch year 2003 2009 2009 2011 Industry Wind All renewable energy industries All manufacturing industries Solar benefited Details of All wind farms developed in Developers are required All public projects backed by ARRA funds A bonus of 10 percent local content China, private or public, to have to have 50 percent of their must use ARRA-compliant products. If on the feed-in tariff requirement locally made components. The project costs come from the domestic content of a product is over when 60 percent of the percentage of local content Ontario goods and labor at the 50 percent and manufactured within material costs of an started at 50 percent in 2003 time they reach commercial the U.S., it can be considered ARRA installation are from and was increased to 70 operation. Increased to compliant. products manufactured percent in 2004. 60 percent from January 2011. in the European Union. Impact Worked effectively: Working well: Mixed results (for solar): Impact as yet unknown: By the time the condition was Companies like Silfab, Most of ARRA-compliant companies are Likely to benefit revoked in 2009, China had Suntech, and Schneider set foreign players, such as Kyocera, Sharp, manufacturers in transformed from a marginal up manufacturing bases in Sanyo (Japan); Suntech (China); Schott Germany and Spain. player to being the dominant Ontario. (Germany). At the same time, most U.S. FirstSolar qualifies. manufacturer of wind turbines players, such as FirstSolar, Sunpower, Norway included as an in the world. have bulk of manufacturing outside U.S. exception.

Sources: China: Lewis, J.I. “A Review of the Potential International Trade Implications of Key Wind Power Industry Policies in China”, prepared for Energy Foundation: http://www.resource-solutions.org/pub_pdfs/China.wind. policy.and.intl.trade.law.Oct.07.pdf; The New York Times, “To Conquer Wind Power, China Writes the Rules” December 14, 2010: http://www.nytimes.com/2010/12/15/business/global/15chinawind.html. Canada: Ontario Power Authority: http://fit.powerauthority.on.ca/domestic-content-1; Green Energy Act Alliance, “Local Content Requirement and the Green Energy Act” October 2009: http://www.greenenergyact.ca/Page.asp?Pa geID=122&ContentID=1359&SiteNodeID=243; Renewable Energy World, “Trade Barriers Dim Renewable Energy’s Prospects” September 30, 2011: http://www.renewableenergyworld.com/rea/news/article/2011/09/trade-barriers- dim-renewable-energys-prospects. U.S.: Utah Clean Energy, “American Recovery and Reinvestment Act of 2009: Summary of Clean Energy Stimulus Funds” December 2009: http://utahcleanenergy.org/policies_and_issues/arra_clean_energy_stimulus_summary; Bright Star Solar, “ARRA Compliant Solar Photovoltaic Equipment” 2011: http://www.brightstarsolar.net/2011/02/arra-compliant-solar-photovoltaic-equipment/; EcoDirect, “ARRA Compliant Solar Panels – Buy American”: http:// www.ecodirect.com/Buy-American-Solar-Panels-s/548.htm. Italy: Renewable Energy World, “New Italian PV Tariffs Complex and Robust “ July 14, 2011: http://www.renewableenergyworld.com/rea/news/article/2011/07/new-italian-tariffs-complex-and-robust-2000-mw-may-be-installed- in-2011; RECharge, “Norway’s REC talks its way into ‘EU only’ Italian solar FIT bonus” September 8, 2011: http://www.rechargenews.com/energy/solar/article277027.ece; First Solar (Investor Release), “First Solar Modules “Made in EU” Qualify for Italian Feed-In Tariff Premium” September 1, 2011: http://investor.firstsolar.com/releasedetail.cfm?ReleaseID=602662.

PAGE 22 | Laying the Foundation for a Bright Future mercantilist, export-oriented interests, then clearly it would be challenged. But if its purpose is to strengthen and develop a nascent clean energy sector, in part to protect the environment, then exceptions under WTO rules could be invoked.137 In India’s case, support for solar manufacturing seems, at least so far, to have energy access and energy security imperatives, and little to do with promoting exports at the expense of foreign entities. Moreover, imports of solar equipment do not appear to have been adversely affected. At some point in the future, should India become a major exporter, it would have to contend with potential international opposition to its DCR rules.

Key Findings Based on research and stakeholder discussions, we have formulated five key findings on the solar manufacturing Solar photovoltaic modules manufactured by Solaria Corporation, sector: installed in a solar power plant in India. CREDIT: SOLARIA CORPORATION CREDIT: 1. Phase 1’s domestic content requirement has contributed to shifting the market toward thin film PV projects due could be successful in India. The flexibility built into the to their exemption from the DCR. Fifty-percent of Batch phased NSM guidelines allows such changes, though I projects use thin film and crystalline cells, a larger modifications to guidelines should be balanced against proportion than in the global PV market. Batch II projects the benefits of predictable and stable policies for the use even more thin film technology, probably because solar sector. Batch II requirements for domestic crystalline cell manufacturing have made lower-priced, imported thin In addition to expressing the need for a market-based film, often coupled with low-cost international financing, approach to industry development, many stakeholders more attractive to developers. have proposed DCR modifications to address perceived weaknesses. Rather than an “absolutely restrictive” policy 2. The Phase 1 domestic content requirement as currently that cordons off the Indian market to foreign parties, structured has not effectively created the market some solar firms have suggested a preferential tariff to conditions for local solar PV manufacturing envisioned incentivize domestic manufacturing.135 Another idea is by the NSM. The DCR has not created a level playing to have the DCR require only that a certain percentage of field. Instead it has contributed to a strong thin film bias the value of solar components be manufactured in India and has possibly been a detriment to Indian crystalline- (like the DCR for solar thermal technologies). However, based manufacturing. this route raises potential monitoring obligations for 3. The Indian solar cell manufacturing system requires MNRE as the nodal agency and could increase the systemic improvements in infrastructure, domestic low- transaction costs for manufacturers and government cost financing, and raw materials. officials. A smaller cross-section of foreign stakeholders 4. More than half the jobs in the solar value chain and value assert that good manufacturing policy is not compatible creation are not in solar manufacturing, nor specifically with good trade policy and question the use of any in cell and module manufacturing. Severe environmental market-restrictive policies at all. costs linked to unregulated solar manufacturing also exist. As India’s solar industry and broader economy continue 5. A modified DCR could have a positive influence on to grow, its actions will have greater international domestic manufacturing if it is technology-neutral and implications. The current DCR has elicited a mixed not overly restrictive. international response and has raised possible World Trade Organization (WTO) concerns,136 which a revised DCR may not be immune from either. India will Key Recommendations increasingly need to consider international reactions as An overarching, comprehensive, and long-term policy it transitions from being a marginal manufacturer to a framework that integrates policies across India and provides major exporter. Under multilateral trade rules, if policies necessary support for the entire solar market—including discriminate against foreign entities and are found to manufacturing—is necessary to achieve the NSM’s goals. have adverse impact on them, then such measures can Based on our research and stakeholder discussions, we have be disputed at the WTO. However, the purpose of the formulated five key recommendations for developing a solar policies also matters. If the policy exists purely to serve manufacturing hub in India:

PAGE 23 | Laying the Foundation for a Bright Future 1. The central government, with stakeholder input, should could consider incentives other than a DCR, such as a explore whether incentivizing policies with a broader preferential tariff, to promote domestic manufacturing. scope than solely cell and module manufacturing would 4. Manufacturers should strengthen existing networks, capture more value and create more solar jobs within the such as SEMI, to explore ways to ease barriers to Indian context. manufacturing in India. The manufacturing networks 2. MNRE should tailor the DCR to be technology-neutral could develop policy proposals to address natural and market-enabling. MNRE could explore two options: resource, finance, and trade limitations. (a) a DCR requiring that all PV modules be manufactured 5. MNRE should work with the Ministry of Environment in India, uniformly enforced across all PV technologies, and Forests to strengthen environmental safeguards or (b) a DCR specifying that a certain percentage of solar to ensure that manufacturing can continue to grow PV components be manufactured in India. rapidly while protecting community health and the 3. To avoid being restrictive and to lessen the potential environment. for international controversy or trade disputes, MNRE

PAGE 24 | Laying the Foundation for a Bright Future VII. ENABLING ENVIRONMENT: FACILITATING LAND ACQUISITION, PERMITTING & POWER EVACUATION

One of the immediate goals of Phase 1 of the Solar Mission is to create an “enabling environment” for solar technology penetration in the country. An “ enabling environment is created by fostering rapid deployment of solar energy nationwide by creating favorable conditions to develop solar projects. — Mission Document”138

HOW TO CREATE AN ENABLING 2. Power Evacuation: ENVIRONMENT Grid Connectivity and Proximity Our discussions focused on four main areas affecting timely There is currently a mismatch between the speed with which project implementation. These areas extend beyond the more power projects can be set up and the time it takes to provide project-specific bankability and manufacturing concerns: the supporting infrastructure. Grid connectivity for utility- scale solar projects depends on grid capacity, proximity, and 1. Land acquisition; availability. Many project developers have difficulties siting 2. Power evacuation; projects in areas with sufficient grid capacity, resulting in 3. Community involvement; and increased costs and project commissioning delays. Power availability affects project operation and power generation. 4. A comprehensive National Solar Mission To address adequate capacity and proximity, stakeholders implementation plan. have debated whether the government should invest in substations and transmission facilities before projects were 1. Land Acquisition: set up. Yet for current projects in Gujarat or Rajasthan—where Clearances and Irradiance Data the majority of solar PV is being deployed—grid connectivity Several project developers have noted barriers to acquiring has not been raised as a major issue, in part because of the land and obtaining requisite clearances. The actual cost of states’ approach to using solar parks. Decisions on siting the purchasing land is not a significant barrier, as land costs solar parks are, in turn, based on connectivity to the grid. are usually 5 percent of total project costs. In fact, some As the Indian solar market grows and larger capacities are developers indicate that they would be willing to pay more commissioned, especially during Phase 2 of the Mission, for land. Rather, projects often suffer delays given the slow planning for future grid upgrades must receive emphasis in rate at which local authorities convert land use designations advance, so that the infrastructure is available as projects are from agricultural to non-agricultural. After an allocation commissioned. under a lease or sale by the state government, weeding The “last-mile” infrastructure—how solar projects are through local claims on land presents another hurdle. physically connected to the grid—is a source of confusion. Locating projects in areas of high solar irradiance, Some developers and officials identify a lack of clarity on close to the power grid and with adequate resources and who bears the cost of last-mile infrastructure, state utilities infrastructure, is also a challenge, especially given India’s or developers. For some developers, who had not anticipated limited geographic mapping and limited data on solar the costs of last-mile construction, project costs have irradiance. The grid-proximity and irradiance challenges are exceeded allocated budgets. Who bears the additional cost compounded by traditional difficulties that nearly all energy for the last mile seems to vary according to supporting state projects face, such as poor grid infrastructure, transmission or central government policies. Implementation support problems, and chronic power shortages. by state and central authorities could clarify which entity bears the last-mile infrastructure cost. The NSM designates that state agencies and utilities are responsible for creating

PAGE 25 | Laying the Foundation for a Bright Future TABLE 8: Solar project land development options

Land Ownership Key Features Advantages for Developers Disadvantages for Developers Developer Project developer purchases land Full developer flexibility in choice of location High upfront costs Purchased & and special purpose vehicle (SPV) according to solar resource and other siting SPV Owned entity owns the land as an asset on criteria Challenging purchase process if land use its balance sheet must be changed, e.g., from agricultural to Use of land as part of collateral for project non-agricultural or multiple land claims finance Developer has full responsibility for site Option of sale or renewal at end of due diligence and permitting project life

Lease by Government purchases, acquires or Lower upfront investment in land cost Lesser flexibility in siting and choice of Government otherwise earmarks land for solar location development Ability to spread land costs over project lifetime and matching of costs with revenues Limited opportunities to lease government Lease periods typically match land project life, e.g., 30 years Availability of land with pre-approved clearances and permits Increased government interactions and processes Flexible government incentives and leases Solar Park Government or a private developer Solar parks provide economies of scale in High reliance on solar park developer purchases or acquires land procurement, permitting, and development of or government for correct siting and power assessment of solar resource Solar parks usually include incentives such as permits for Well planned solar parks can allow quicker Potential cost increase and weaker developers and provide dedicated and more reliable project execution with fewer negotiating position with respect to power infrastructure implementation risks for developers government and solar park developer

the infrastructure for evacuating power from project sites coal-fired power plant. However, solar development can have to transmission lines. There is no additional national- negative social and ecological impacts if poorly planned. With level support for power evacuation. The cost for last-mile 5 to 10 acres required per megawatt,139 ground-mounted solar infrastructure can be 5 to 10 percent of total project costs, power is a land-intensive option. Currently, the majority of according to a 5 MW Phase 1 developer. Yet as project sizes Phase 1 grid-connected solar projects are in remote locations, increase, the cost of last-mile infrastructure becomes a where the primary contentious issues are conflicting land smaller percentage of the total project cost and may be more claims and land allocation for grazing. Opposition to living readily absorbed. close to major infrastructure projects, which has been an issue in other countries, has not yet been seen on a large 3. Community Involvement and Habitat Protection scale in India. However, more social and ecological issues may surface as the NSM ramps up. As the solar energy Local communities, largely village-based, are critical to market matures, it is critical that government policies and the success of solar projects. Developers and local officials developers minimize impacts on the local communities and must involve village members in all stages, from planning ecosystems.140 to operation. Villagers’ concerns and preferences need to Local communities can be beneficiaries of solar be considered to maximize the benefits of solar power and development, but they stand to lose if not sufficiently to avoid adversely affecting communities in the scale-up and correctly integrated in the development process. An of operations. Successful solar projects are integrated into appropriately designed land-use policy minimizes land the community fabric, providing local jobs and building conflicts and incorporates multiple uses of solar-sited land. community pride in renewable energy development. Developers must consider how solar projects can help Ineffective community involvement can create contentious provide energy to local citizens, who are often impoverished conditions for permitting and for solar operations. and in remote locations. Moreover, local communities need Solar PV projects, once installed, can provide significant to be empowered and integrated into planning processes that benefits to local communities and cause less pollution than a

PAGE 26 | Laying the Foundation for a Bright Future 5 MW grid-connected solar photovoltaic plant developed by Punj Lloyd Infrastructure under the NSM and constructed by Punj Lloyd Delta Renewables in Bap village, Jodhpur, Rajasthan. CREDIT: PUNJ LLOYD CREDIT: take into account their concerns and preferences. This will reverse auctions to complement the annual benchmarks. engender greater community acceptance and enthusiasm for Government policies focused on broader planning solar energy projects. issues such as siting, raw materials and resource availability, proximate location of interdependent 4. Comprehensive Policy Framework: industries, cluster development, and environmental 20-GW Road Map impacts are also needed. Leading solar manufacturing nations often develop clusters of interrelated activities to While the National Solar Mission’s 20-GW target and related facilitate knowledge, skills, R&D, and network synergy.141 policies have effectively launched a nascent market, several Recognizing that the solar energy system requires not stakeholders have identified the need for a comprehensive only cells and components but also inverters, power road map that provides certainty for the private sector equipment, and other system equipment, stakeholders and communities. At a minimum, government policies suggest expanding government policies to cover the must provide clarity on the number and type of projects solar project’s entire supply chain. For example, while expected to come online in the future to allow stakeholders renewable-energy power storage is currently not to confidently make long-term investments. Moreover, cost-efficient, storage technologies could arguably be stakeholders suggest that explicit strategies are needed in transformative for India and encourage more investment four main areas: in the future.142 a. Supporting the entire solar energy supply chain; b. Research and Development: Solar R&D is needed to b. Research and development (R&D); improve domestic manufacturing and services and c. Skilled labor force; and make India globally competitive. R&D will help develop new technologies and adapt global technologies to d. Favorable customs and excise duties. Indian conditions (the labor market, weather patterns, maintenance and connectivity issues, etc.). Early and a. Supporting the Entire Solar Energy Supply Chain: significant investment in R&D is essential for India to Stakeholders cite the need for more planning and become a large solar market. predictability in solar energy growth. Some suggest that instead of the current broad ranges of target solar c. Skilled Labor Force: Stakeholders identified a shortage capacity in multiyear phases, the government should of manpower with skills relevant to the solar industry, specify annual benchmarks for solar generation capacity. which poses even greater challenges to rapidly scaling Others propose a timeline for regular bidding and solar energy.143 Government policies geared toward

PAGE 27 | Laying the Foundation for a Bright Future developing a skilled workforce are needed. Jobs related to Related issues raised by developers include delays solar energy include site preparation, design, permitting, in customs notification and excise duty exemption legal processing, financing, mounting and installation, certificates and the requirement to apply for each engineering, and distribution. component separately. MNRE has taken steps to d. Favorable Customs and Excise Duties: Stakeholders streamline exemption certificates by classifying suggest modifying customs and excise duties to be more components for which developers can apply for favorable to solar energy development. While customs exemptions without first signing a power purchase duties are levied on certain raw materials required agreement. In terms of incentives, the Indian for local manufacturing, there is no duty on finished government recently modified the Special Incentive products such as modules (when imports are allowed).144 Package Scheme under the Semiconductor Policy 2007 This inverted customs structure disadvantages domestic to offer capital subsidies for solar manufacturing and 156 manufacturers.145 Some stakeholders suggest removing semiconductors more generally. When the policy was all customs duties on raw materials, or at least imposing announced in 2007, the Indian industry claimed that the smaller ones. incentives (20 to 25 percent) were too meager in light of the requisite multi-billion dollar investment, particularly when compared with China’s and Taiwan’s 50 percent subsidies.157 Customs duties and subsidies illustrate the POLICY ANALYSIS: IMPACTS AND GAPS interconnectedness of government policies and industry action and the need for a holistic approach. Several national and state policy instruments support growing “Solar India” under the Mission more broadly. Some instruments have been successful, while others need modification. Key Findings SOLAR PARKS: Leading states, like Rajasthan and Gujarat, have Based on research and stakeholder discussions, we have developed areas of land zoned for multiple solar project development. formulated five key findings for an enabling environment: Many solar parks have been effective at reducing costs, facilitating 1. Land acquisition issues, including siting, clearances, and permitting, and providing power evacuation and transmission. In early grid proximity, are delaying projects. Currently, land costs 2012, MNRE created the Solar Energy Corporation of India as a vehicle to create solar parks. represent a small share of total project costs and are not the most significant barrier to land acquisition. While POWER CONNECTIVITY: Key states have announced policy support in early stages, solar parks have proved to be effective in for power evacuation from renewable energy. Rajasthan disbursed facilitating project development and reducing delays. `2900 crore (about $5.6 million) to develop power evacuation for renewable energy. Gujarat and Maharashtra have policies to improve 2. Several developers and financiers have identified power state utility distribution companies to support solar power evacuation. evacuation and access to the grid as issues of concern, and in their absence, it has been difficult to secure SPECIAL INCENTIVE PACKAGE SCHEME: The Semiconductor financing for projects. Policy 2007146 encourages semiconductor manufacturing, including for solar PV. The Special Incentive Package Scheme (SIPS) offers 3. Developers are confused about which entity or agency tax rebates and capital subsidies ranging from 20 to 25 percent, but is responsible for last-mile infrastructure, resulting in imposes minimum investment thresholds. SIPS has been marginally project delays. effective, and modifications are being considered. 4. Actively involving communities in every stage, from CUSTOMS & EXCISE DUTIES: Customs duties for solar products planning to operation, will strengthen solar energy support in part the NSM’s aim to build domestic manufacturing. projects. Project developers already recognize that 147 Currently Indian customs laws impose no duties on finished there are co-benefits that can be shared with local 148 149 photovoltaic modules, 21.5 percent duty on inverters, 5 percent communities and that problems can arise if local duty for equipment imported for initial stages of solar projects,15012.8 communities are not engaged throughout the process. percent duty on imports of certain materials used to manufacture cells or modules in India,151 and no duties on toughened glass and silver 5. To enable industry progress, developers, banks, and paste imported for manufacture of solar cells or modules.152 India other stakeholders have identified the need for a long- exempts from excise duties all items for machinery, instruments, and term implementation plan that focuses on the entire other equipment required for initial solar power project development, supply chain, investment in research and development, subject to certain conditions.153 labor force training, and the provision of sufficient and RESEARCH AND DEVELOPMENT: The NSM encourages customized financial incentives. participation of premier institutes like the Indian Institute of Technology, Ministry of Human Resources Development, and Ministry of Labour to develop a skilled workforce across various levels.154 For example, IIT Bombay’s National Centre for Photovoltaic Research and Education (NCPRE), launched in 2010, focuses on cutting-edge PV research to support global solar energy development.155

PAGE 28 | Laying the Foundation for a Bright Future Key Recommendations 3. Before bidding for Phase 2 projects begins, MNRE and developers should work together to resolve whether last- Based on research and stakeholder discussions, we have mile infrastructure costs should be included in project formulated five key recommendations for an enabling estimates. environment: 4. To strengthen solar projects, developers should integrate 1. The central government should closely and local communities at the planning stage through regular systematically coordinate with state governments community meetings and engagement. on project allotment, land acquisition, and project development, particularly for the larger Phase 2 projects. 5. The solar industry should create a network of solar Specifically, MNRE should work with states to develop energy groups focused on resolving common industry effective land allocation strategies for solar projects, concerns, interacting with government agencies, including strategies to facilitate siting and planning developing solutions for the entire solar supply chain, requirements. investing in research and development, and increasing the solar energy workforce. 2. MNRE should also collaborate closely with the Ministry of Power to plan for transmission infrastructure upgrades within a long-term power planning framework focused on scaling renewable energy.

PAGE 29 | Laying the Foundation for a Bright Future VIII. CONCLUSION

ndia has a tremendous opportunity to capitalize on its natural solar resources to address growing energy deficits in a sustainable manner. The Jawaharlal Nehru National Solar Mission Ihas established the framework within which an ecosystem for a solar industry in India can develop. The objectives of the Mission are manifold: increasing deployed capacity, enforcing regulatory obligations for using renewable energy, creating a manufacturing hub in India, and promoting R&D for new solar technologies. Achieving these objectives will take different amounts of time. Having initiated growth in the nascent solar industry, the Mission’s role will now be to strategically prioritize these multiple objectives to ensure that the many entities within India’s solar ecosystem perform in a coordinated way to establish India as a global leader in solar energy.

This report’s analysis finds that each key aspect of the while others should focus on disseminating information solar ecosystem—commissioning projects, increasing their to the market, and others should focus on R&D and skill bankability, developing a manufacturing base, and creating development. Only when a comprehensive financing an enabling environment—faces issues that can be improved strategy is in place will different financial interventions (e.g., by the involved stakeholders and the NSM. While the Indian priority sector lending, development of the REC market, and government and solar energy stakeholders have made infrastructure debt funds) succeed in scaling solar energy significant progress, much more needs to be done. investments. The most important intervention would be to create a Technology-Neutral Manufacturing: To make domestic common platform, under the Mission, to bring together manufacturing policies technology-neutral and market- multiple stakeholders to review progress under the Mission enabling, MNRE could explore the following options: (a) and learn from both successful projects and those facing a DCR requiring that all PV modules be manufactured in challenges. Toward this end, implementing three key policy India, uniformly enforced across all PV technologies; or (b) priorities this year would enable strong growth under the a DCR specifying that a certain percentage of the solar PV Solar Mission: components be manufactured in India; or (c) a preferential Benchmarks, Transparency, and Monitoring: There is an incentive to promote domestic manufacturing instead of a urgent need to increase the level of information available DCR to avoid being restrictive and to lessen international on the Mission’s progress. The government should enforce controversy. periodic updates on each project’s progress, without which its The National Solar Mission has the potential to transform project selection process and due diligence will be called into India’s energy sector and help power its rapid economic question. The government should adopt a common definition growth while building a sustainable future. India needs of “commissioning” as well as common benchmarks for continued government and private sector support, increased commissioning projects under the state and national investment in manufacturing, and more technology Missions. Moreover, for financiers to become more familiar sharing to unleash this potential in the next phase of the with technologies, and for component standards to be closely Solar Mission. Beyond energy security and environmental monitored, project technology choices need to be transparent. imperatives, lessons learned from a successful National Solar Finally, irradiance data must be made publicly available to Mission could provide a road map for other countries seeking increase confidence and investment in the solar market. to scale up access to clean, affordable, and sustainable energy Strategic Financing: Central and state government worldwide. This report is submitted with the hope that its agencies, with MNRE’s leadership, should develop a strategy findings and recommendations can advance implementation to optimize the roles of different financial institutions. As in subsequent phases and promote a comprehensive and the market matures, various institutions should leverage strategic approach to building a robust grid-connected solar their expertise to grow India’s solar market. For example, industry in India. certain groups should focus on providing project financing,

PAGE 30 | Laying the Foundation for a Bright Future IX. LIST OF STAKEHOLDER ORGANIZATIONS

From September 2011 to March 2012, we held discussions and roundtables with many stakeholders, including the following organizations, to develop this report:

Abhijeet Larsen & Toubro Abound Solar Lawrence Berkeley National Laboratory Acira Solar Pvt. Ltd. Maharashtra Seamless Alex Spectrum Radiation Pvt. Ltd. Maharishi Solar Applied Materials Mahindra Solar One Pvt. Ltd. Arbutus Consultants Pvt. Ltd. Master Consultancy & Productivity Pvt. Ltd. Avantha Power Ministry of New and Renewable Energy Axis Bank Moser Baer Clean Energy Azure Power Nomura Group Bergen Solar Power & Energy Ltd. NTPC Vidyut Vyapar Nigam Bridge to India Office of the U.S. Trade Representative Carbon War Room Oswal Woollen Mills CCCL Infrastructure Precision Technik Pvt. Ltd. Central Electricity Regulatory Commission Punj Lloyd Delta Renewables Centrotherm Photovoltaic AG Rexroth Bosch Group Credit Rating and Information Services of India Ltd. Rithwik Projects DDE Renewable Energy Pvt. Ltd. SEMI Energy Alternatives India Shakti Sustainable Energy Foundation Ernst & Young Solar Energy Society of India Feedback Infrastructure Services Solar Semiconductor FirstSolar, Inc. SOLARCON 2011 Participants GIZ SolarEdge Technologies Global Business Consultants Solaria Corporation Green Stratos Consulting Pvt. Ltd. State Bank of India ICICI Bank STEAG Energy Services (India) Pvt. Ltd. IndenGroup SunEdison Energy Pvt. Ltd. Indian Oil Corporation Tata BP Solar Indian Renewable Energy Development Agency Umicore Indosolar U.S. Department of Commerce International Finance Corporation U.S. Department of Energy Intersolar 2011 Participants U.S. Export-Import Bank Karnataka Power Corporation U.S.-India Business Council KPMG U.S. Overseas Private Investment Corp. Kyocera Solar Welspun Group Lanco Solar Energy Pvt. Ltd. Wolfensohn Capital

PAGE 31 | Laying the Foundation for a Bright Future Endnotes Industry 2010: Contemporary Scenario and Emerging Trends,” Office of the Principal Scientific Adviser to the Government of 1 MNRE press statement, “Generation of Solar Power,” March 19, India, May 2010, isaonline.org/documents/ISA_SolarPVReport_ 2012, pib.nic.in/newsite/pmreleases.aspx?mincode=28 (503.9 May2010.pdf (“GoI Solar PV Report,” accessed April 2, 2012). MW on March 19, 2012; accessed April 2, 2012); Communication from MNRE, March 26, 2012 (clarifying 3 MW increase to 506.9 13 MNRE, “Jawaharlal Nehru Solar Mission: Towards Building MW); Natalie Obiko Pearson, “India Misses Solar Target With Solar India,” 2009, mnre.gov.in/solar-mission/jnnsm/mission- 20-Fold Jump in Capacity in Year,” Bloomberg, January 2012, document-3/ (“Mission Document,” accessed April 2, 2012). bloomberg.com/news/2012-01-20/india-misses-solar-target- 14 See id. with-20-fold-jump-in-capacity-in-year.html (17.8 MW in 2010; accessed April 2, 2012). 15 See id. 2 “2011 Worldwide Renewable Investments Set Record,” Today’s 16 See id. Energy Solutions, January 25, 2012, onlinetes.com/worldwide- 17 NVVN operates as the nodal agent for procuring solar power renewable-energy-investments-tes-012512.aspx (accessed April under the NSM and is an independent agency under NTPC 2, 2012). Limited. NTPC Limited (formerly National Thermal Power 3 U.S. Energy Information Administration, “Country Analysis Corporation) is the largest of India’s state-owned energy service Briefs - India,” November 21, 2011, http://205.254.135.7/EMEU/ providers, which bundles power from their unallocated quota to cabs/India/pdf.pdf (accessed April 19, 2012). supply to utilities. 4 McKinsey Global Institute, “India’s Urban Awakening: Building 18 MNRE, “Implementation of a Payment Security Scheme (PSS) Inclusive Cities, Sustaining Economic Growth,” April 2010: for Grid-Connected Solar Power Projects Under Phase 1 of mckinsey.com/Insights/MGI/Research/Urbanization/Urban_ Jawaharlal Nehru National Solar Mission (JNNSM) During the awakening_in_India (accessed April 2, 2012); United Nations, Year 2011-12,” mnre.gov.in/file-manager/UserFiles/payment_ “World Population Prospects, the 2010 Revision,” esa.un.org/ security_mechansim_grid_connected_jnnsm_2011_2012.pdf unpd/wpp/index.htm (accessed April 2, 2012). (accessed April 2, 2012). 5 Ministry of Environment and Forests, “Clean Technology 19 Off-grid solar is hugely important in a country like India, where Fund Investment Plan for India,” October 23, 2011: moef.nic. millions have no access to modern sources of energy. However, in/downloads/public-information/IP-CTF-2011.pdf (“Clean the mechanisms to provide off-grid solar access will be different Technology Plan,” accessed April 2, 2012). from those applicable to the grid-connected sector. Off-grid, therefore, deserves a separate analysis. 6 Energy Zone: Carbon Footprints, “Sunny Side Up,” The Economic Times, economictimes.indiatimes.com/sunny-side- 20 In addition to creating a conducive environment for solar up/shellarticleshow/11434880.cms (accessed April 2, 2012). systems, the Mission’s policies help build demand and capacity within the solar sector and shape the rest of the solar ecosystem. 7 Natalie Obiko Pearson, “India’s ‘Astonishing Auction’ Pushes Down Global Solar Price,” Bloomberg, December 5, 2011: 21 In early 2012, Gujarat, Rajasthan, and Karnataka adopted solar bloomberg.com/news/2011-12-02/india-s-solar-power-bid- policies and are projected to have a cumulative 1,050 MW of prices-sink-to-record-consultant-says.html (accessed April 2, solar capacity installed by 2013. See Bridge to India, “The India 2012). Solar Handbook,” December 13, 2011: bridgetoindia.com/ reports (“Bridge to India Report,” accessed April 2, 2012). 8 Steve Leone, “Report Projects Massive Solar Growth in India,” Renewable Energy World, December 9, 2011: 22 RPOs and RECs are described in more detail in the Bankability renewableenergyworld.com/rea/news/article/2011/12/report- section. projects-massive-solar-growth-in-india (accessed April 2, 2012). 23 Examples of international funding agencies that have 9 KPMG-India, “The Rising Sun: A Point of View on the invested significantly in Indian solar projects include the U.S. Solar Energy Sector in India,” 2011: kpmg.com/IN/en/ Export-Import Bank, the U.S. Overseas Private Investment IssuesAndInsights/ThoughtLeadership/The_Rising_Sun_full. Corporation, KfW Development Bank of Germany, and the pdf (“KPMG Report,” accessed April 2, 2012). Asian Development Bank. See, e.g., CleanBiz Staff, “India lands $1.36 billion of US Govt. Cleantech Finance,” CleanBiz Asia, July 10 Shawahiq Siddiqui, “The Hidden Impacts of Solar India,” 21, 2011, www.cleanbiz.asia/story/india-lands-136-billion-us- TheSolarIndia.com, October 1, 2010: thesolarindia.com/articles. govt-cleantech-finance (accessed April 16, 2012). php?page=6# (accessed April 2, 2012); article also located at: infochangeindia.org/environment/features/the-hidden- 24 Many projects are funded by both debt and equity, but so far, impacts-of-solar-india.html (accessed April 2, 2012). more equity has been required to fund NSM solar projects than the typical 70/30 debt-equity ratio. Discussions with 11 Climate Himalaya, “India to Add 9th Mission to Climate stakeholders, November to December 2011. Change Action Plan—NAPCC,” May 27, 2011: chimalaya. org/2011/05/27/india-to-add-9th-mission-to-climate-change- 25 The primary solar manufacturer categories include solar PV action-plan-napcc/ (accessed April 2, 2012). components (e.g., modules, cells); solar thermal equipment (e.g., mirrors, turbines); and the balance of system components 12 Prior to the NSM, the national government promoted (e.g., inverters, heavy electrical equipment, wiring, and power solar power technologies through the National Rural plant hardware). Electrification Policy (2006), the Semiconductor Policy (2007), and a generation-based incentive scheme (2008). For more 26 Examples of important R&D efforts include: development of information, see India Semiconductor Association, “Solar PV next-generation solar cell technologies to reduce production

PAGE 32 | Laying the Foundation for a Bright Future costs or increase efficiency, studies of solar irradiance and ece?homepage=true&ref=wl_industry-and-economy_art weather patterns (including dust storms), and advances in (accessed April 2, 2012). routine maintenance (such as cleaning and upkeep of grid 36 Raj Prabhu, “India Second Quarter Solar Market Update—Did connectivity) to strengthen the efficient operation of current India Get Their Solar Policy Right on the First Go?” Mercom and future plants. Capital Group, mercomcapital.com/did-india-get-their-solar- 27 National policies include the removal of excise duties for certain policy-right-on-the-first-go (accessed April 2, 2012). imports and special incentive package schemes for solar cell 37 Originally, 30 projects were awarded in Batch 1, but manufacturing. State policies include provision of land-use two were canceled due to developers’ inability to meet permits to set up solar plants. NVVN criteria. See NVVN, “Details of Project Developers 28 See Mission Document. Under JNNSM Phase I With Existing PPA,” nvvn.co.in/ DetailsofProjectDevelopersunderJNNSMPhaseIwith 29 See id. Rooftop solar has received limited attention under Phase existingPPA.pdf (accessed April 2, 2012). 1 of the Mission so far. As a locally-accessible source of energy, distributed generation through rooftop solar suffers fewer 38 Recharge News, “India May Fine Most PV Projects for Delays in transmission losses, maintains better grid stability, costs less Messy Start to NSM,” February 21, 2012, rechargenews.com/ than large solar plants, and encounters fewer land acquisition energy/solar/article304342.ece (accessed April 2, 2012). barriers. See P.S. Deodhar, “Why Distributed Solar Power is 39 MNRE, March 19, 2012, press statement; “Communication From Crucial,” Power Engineering Magazine, April 5, 2012, http:// MNRE,” March 26, 2012 (clarifying 2.4-MW increase to 506.9 www.power-eng.com/news/2012/04/04/why-distributed-solar- MW). power-is-crucial.html (accessed April 16, 2012). 40 SolaireDirect’s bid was more than 51 percent lower than the 30 Natalie Obiko Pearson, “India Misses Solar Target With 20-Fold CERC base tariff of `15.39/kWh ($0.30/kWh). The highest Jump in Capacity in Year,” Bloomberg, January 2012, bloomberg. winning bid was for `9.44/kWh ($0.18/kWh), about 39 percent com/news/2012-01-20/india-misses-solar-target-with-20-fold- lower than the base tariff. jump-in-capacity-in-year.html (17.8 MW in 2010) (accessed April 2, 2012). 41 See KPMG Report. 31 MNRE press statement, “Generation of Solar Power,” March 19, 42 Batch I had allotted 470 MW of solar thermal; Batch II focused 2012, pib.nic.in/newsite/pmreleases.aspx?mincode=28 (503.9 solely on PV projects. See NVVN, “Details of Project Developers MW on March 19, 2012; accessed April 2, 2012); Communication under JNNSM Phase I with Existing PPA,” March 2012, nvvn. from MNRE, March 26, 2012 (clarifying 3 MW increase to 506.9 co.in/DetailsofProjectDevelopersunderJNNSMPhaseIwith MW); Natalie Obiko Pearson, “India Misses Solar Target With existingPPA.pdf (accessed April 2, 2012). 20-Fold Jump in Capacity in Year,” Bloomberg, January 2012, 43 See id. bloomberg.com/news/2012-01-20/india-misses-solar-target- with-20-fold-jump-in-capacity-in-year.html (17.8 MW in 2010; 44 Panchabuta, “Alex Green wins Odisha Solar bid quoting Rs 7 a accessed April 2, 2012). unit.” February 29, 2012, panchabuta.com/2012/02/29/alex- green-wins-odisha-solar-bid-quoting-rs-7-a-unit/ (accessed 32 For example, no past solar experience or project development April 2, 2012). capabilities were required for qualification. See MNRE, “Jawaharlal Nehru National Solar Mission Guidelines for 45 Today’s Energy Solutions, “2011 Worldwide Renewable Selection of New Grid-Connected Solar Power Projects,” Investments Set Record,” January 25, 2012: onlinetes.com/ July 25, 2010, mnre.gov.in/file-manager/UserFiles/jnnsm_ worldwide-renewable-energy-investments-tes-012512.aspx gridconnected_25072010.pdf (accessed April 2, 2012). (accessed April 2, 2012). 33 Without experience criteria, some firms may have created shell 46 Up to 10,000 MW at `10 (about $1.9 million) crore per MW. companies with `150 million (about $2.9 million) net worth, 47 MNRE press statement, “Generation of Solar Power,” March 19, which were eligible for bidding from Day 1 of incorporation. 2012, pib.nic.in/newsite/pmreleases.aspx?mincode=28 (503.9 Chandra Bhushan and Jonas Hamberg, “The Truth About MW on March 19, 2012; accessed April 2, 2012); Communication Solar Mission,” Down to Earth Magazine, February 15, 2012, from MNRE, March 26, 2012 (clarifying 3 MW increase to 506.9 downtoearth.org.in/content/truth-about-solar-mission MW); Natalie Obiko Pearson, “India Misses Solar Target With (accessed April 2, 2012). 20-Fold Jump in Capacity in Year,” Bloomberg, January 2012, 34 Richa Mishra, “Solar Mission Gets 418 Requests for Projects bloomberg.com/news/2012-01-20/india-misses-solar-target- Under Phase 1,” The Hindu Business Line, September 26, 2010: with-20-fold-jump-in-capacity-in-year.html (17.8 MW in 2010; thehindubusinessline.com/todays-paper/article1005109. accessed April 2, 2012). ece?ref=archive (accessed April 2, 2012); T.C. Maholtra, 48 Sanjay Jog, “Banks Say PPA Structure for Solar Projects Not “Aggressive Bids at Heart of JNNSM’s Batch 2 of Phase 1 Bankable,” Business Standard, August 31, 2010, business- Tenders,” PV Insider, February 27, 2012: news.pv-insider.com/ standard.com/india/news/banks-say-ppa-structure-for-solar- photovoltaics/aggressive-bids-heart-jnnsms-batch-2-phase-1- projects-not-bankable/406386/ (accessed April 2, 2012). tenders (accessed April 2, 2012). 49 In contrast, for traditional thermal forms of power generation 35 The MAHAGENCO (Maharashtra State Power Generation such as coal-fired stations, the ongoing cost of fuel makes up a Company) project has been delayed due to local forest large part of the ongoing expense of a plant. Developers are able clearance issues. See Rahul Wadke, “Maharashtra Plans to to spread costs over a longer period of time and manage the Revive Sakri Solar Project in Dhule,” The Hindu Business impact of shifts in fuel costs and interest rates. Line, January 22, 2012: thehindubusinessline.com/industry- 50 Annie Baxter, “Record Low Interest Rates Raise Inflation and-economy/government-and-policy/article2823328. Concerns,” National Public Radio, February 29, 2012, npr.

PAGE 33 | Laying the Foundation for a Bright Future org/2012/02/29/147578817/record-low-interest-rates-raise- recregistry india.in/index.php/general/publics/AboutREC inflation-concerns (accessed April 2, 2012). (accessed April 2, 2012). 51 SOLARCON India 2011 presentation by Ex-Im Bank, 65 Ernst & Young, “Beyond Sustainability: India Cleantech Review,” November 10, 2011, sites.google.com/a/semi.org/solarcon- Quarterly Review, 5th Ed., January 2012: ey.com/Publication/ india-2011-presentations/home/november-10-2011 (“Ex-Im vwLUAssets/Beyond_sustainability-EY_cleantech_newsletter- Presentation,” accessed April 2, 2012). This number includes Jan2012/$FILE/Beyond_sustainability-EY_cleantech_ the average baseline lending rate in India of around 9 percent as newsletter-Jan2012.pdf (accessed April 2, 2012). consolidated with bank margins. 66 A number of stakeholders note, however, that off-grid renewable 52 See id. This number includes lines of credit averaging around energy may be the most realistic beneficiary of priority sector 3.5 percent combined with interest rate and currency hedging lending. costs. For instance, EX-IM has provided direct loans at 3.18 67 Reserve Bank of India, “Master Circular—Lending to percent for an 18-year term. Priority Sector,” July 5, 2011: rbi.org.in/scripts/BS_ 53 See id. ViewMasCirculardetails.aspx?id=6603 (accessed April 2, 2012). 54 SOLARCON India 2011 presentation by IREDA, November 68 Global Investor Summit, “Jawaharlal Nehru National Solar 10, 2011: sites.google.com/a/semi.org/solarcon-india-2011- Mission Process, Opportunities & Risk,” presentation by State presentations/home/november-10-2011 (“IREDA KSPoli Bank of India, April 16-18, 2011: renewablemarketsindia.com/ Presentation,” accessed April 2, 2012). attachments/3359_Mr.%20Rajan%20Srinivas.pdf (accessed April 2, 2012). 55 “5 States Accounted for 80% of Total Discom Loss,” Business Standard, February 2, 2012: business-standard.com/india/ 69 MNRE, “Payment Security Mechanism for Grid-Connected news/5-states-accounted-for-80total-discom-loss/156936/on Solar,” May 29, 2010: mnre.gov.in/file-manager/UserFiles/ (accessed April 2, 2012). payment_security_mechansim_grid_connected_ jnnsm_2011_2012.pdf (accessed April 2, 2012). 56 Discussions with stakeholders, November to December 2011; interviews with MNRE officials, March 2012. 70 Assuming the early 2012 exchange rate of $1 to `49.10. 57 Centre for Wind Energy Technology (CWET): cwet.tn.nic.in/ 71 Clean Technology Fund (CTF) is one of the two (along with html/services.html (accessed April 2, 2012). the Strategic Climate Fund) multi-donor trust funds within the Climate Investment Fund (CIF). The CIF has been designed to 58 The government plans to develop a solar atlas identifying support low-carbon and climate-resilient development through hot spots suitable for solar plants across India. See Sanjay scaled-up financing channeled through several multilateral Vijayakumar, “Government Agency to Develop Solar Atlas development banks. of India to Help Development of Solar Power Projects,” The Economic Times, January 30, 2012: articles.economictimes. 72 Press release from the Indian Finance Minister, “Infrastructure indiatimes.com/2012-01-30/news/31005560_1_national-solar- Debt Fund,” November 21, 2011, finmin.nic.in/press_ mission-solar-power-project-developers (accessed April 2, room/2011/infra_debt_fund.pdf (accessed April 2, 2012). 2012). 73 IREDA has also proposed a Renewable Energy Development 59 Interviews with MNRE officials, March 2012. Fund as part of its working group paper for MNRE’s 12th planning process. 60 Reserve Bank of India, ”Branch Banking Statistics,” September 1, 2010: rbi.org.in/scripts/AnnualPublications. 74 MNRE-led roundtable conversations with banks were a positive aspx?head=Branch%20Banking%20Statistics (accessed April 2, step, but stakeholders feel that more such interaction is 2012). required. For example, MNRE commissioned the Indian Banks Association to bring together a working group of leading banks 61 Gayatri Nayak and Deeptha Rajkumar, ”Banks Take Syndicated to discuss key concerns around solar project funding. Loan Route to Fund Large Projects,” The Economic Times, September 8, 2011: economictimes.indiatimes.com/opinion/ 75 Daniel Kammen, “Solar Opportunity or Trade War with U.S,” money-banking/banks-take-syndicated-loan-route-to-fund- Congress Blog, The Hill, December 20, 2011, thehill.com/ large-projects/articleshow/6516255.cms (accessed April 2, blogs/congress-blog/energy-a-environment/200435-solar- 2012). opportunity-or-trade-war-with-us (accessed April 2, 2012). 62 The objective of the Mission is to create a policy and regulatory 76 See Mission Document. environment that provides a predictable incentive structure 77 See Bridge to India Report. enabling rapid and large-scale capital investment in solar energy applications and encourages technical innovation and 78 Bain & Co., “Making the Move to Low-cost Countries,” 2005: lowering of costs. See Mission Document. bain-cp.com/bainweb/PDFs/cms/Public/BB_Making_move_ low-cost_countries.pdf (accessed April 2, 2012). 63 The RPO requires Indian states to procure a certain percentage of their electricity from renewable sources. Currently, 0.25 79 See KPMG Report. percent of each state’s power must be renewable energy, but 80 See NVVN, “List of Batch II Selected Projects,” December 2011, RPOs are expected to rise to 3 percent by 2020. http://www.nvvn.co.in/BatchII_Selected_Projects.pdf (accessed 64 For more information on REC trading, see the Indian Energy April 2, 2012). Exchange: iexindia.com/index.htm (accessed April 2, 2012); 81 See KPMG Report. see also the Renewable Energy Certificate Registry of India: 82 Ernst & Young, “Redefine Global and Local,” ey.com/GL/en/

PAGE 34 | Laying the Foundation for a Bright Future Issues/Business-environment/Winning-in-a-polycentric- Greenpeace, “Solar Generation 6: Solar Photovoltaic Electricity world--globalization-and-the-changing-world-of-business--- Empowering the World,” 2011: greenpeace.org/international/ 1--Redefine-global-and-local (accessed April 2, 2012); “Think Global/international/publications/climate/2011/Final%20 Globally, Act Locally,” Automation World, February 2004: SolarGeneration%20VI%20full%20report%20lr.pdf (accessed jimpinto.com/writings/global1.html (accessed April 2, 2012). April 2, 2012). 83 G.B. Northcraft and G. Wolf, “Dollars, Sense, and Sunk Costs: A 90 J. Rutovitz, A. Atherton, Institute for Sustainable Futures, Life-cycle Model of Resource Allocation Decisions,” Academy University of Technology, Sydney, “Energy Sector Jobs to 2030: A of Management Review, 1984, http://www.jstor.org/discover Global Analysis,” 2009: greenpeace.org/brasil/PageFiles/3751/ /10.2307/258436?uid=3739560&uid=2&uid=4&uid=3739256 energy-sector-jobs-to-2030.pdf (accessed April 2, 2012). &sid=56047508963 (accessed April 16, 2012); A.I. Teger, “Too 91 The Solar Foundation reports the number of U.S. jobs in 2010 Much Invested to Quit,” Pergamon Press, 1980; A. P. David, “Clio and 2011 (approximately 100,000 total). Numbers may not and the economics of QWERTY,” American Economic Review, reflect different sectors’ predominance in the U.S. and the 1985, http://www.econ.ucsb.edu/~tedb/Courses/Ec100C/ import/export imbalance. The Solar Foundation, “National DavidQwerty.pdf (accessed April 16, 2012). Solar Jobs Census 2011,” thesolarfoundation.org/research/ 84 “HHV Plans Rs 60 cr Silicon Ingots Plant in Bangalore,” national-solar-jobs-census-2011 (accessed April 2, 2012). Business Standard, December 28, 2011: business-standard. 92 “Value created” is defined as what a customer will pay for com/india/news/hhv-plans-rs-60-cr-silicon-ingots-plant-in- a product. Net value created is calculated as the difference bangalore/459923/ (accessed April 2, 2012). between what a customer will pay for a product, less the input 85 R. Deshmukh, et al., “Analysis of International Policies in costs (e.g., capital, labor, precursor products) to create the the Solar Electricity Sector: Lessons for India,” Prayas India, product. Value is normalized by MW of installed capacity. Lawrence Berkeley National Laboratory, January 2011: ies.lbl. 93 According to MNRE’s internal analysis, however, approximately gov/solar_electricity_sector (“Prayas Report,” accessed April 2, 50 percent of the value lies in the solar cells and modules. Data 2012). backing up this estimate have not been reviewed by the authors 86 Solar manufacturing has been a priority for the Department of this report. of Energy’s SunShot initiative, a program to engender low-cost 94 The 30 percent is a total of 20 percent to polysilicon, wafers, solar in the next decade. Other support includes loan guarantee and cells and 10 percent to modules. See GTM Research, programs and grants provided by several federal agencies. “U.S. Solar Energy Trade Assessment 2011: Trade Flows and See U.S. Department of Energy, Loan Programs Office, “The Domestic Content for Solar Energy-Related Goods and Services Financing Force Behind America’s Clean Energy Economy,”lpo. in the United States,” prepared for the Solar Energy Industries energy.gov/?page_id=45 (accessed April 2, 2012); Bright Star Association (SEIA), August 2011: seia.org/galleries/pdf/GTM- Solar, “ARRA Compliant Solar Photovoltaic Equipment,” SEIA_U.S._Solar_Energy_Trade_Balance_2011.pdf (“SEIA 2011: brightstarsolar.net/2011/02/arra-compliant-solar- Report,” accessed April 2, 2012). photovoltaic-equipment/ (accessed April 2, 2012); Utah Clean Energy, “American Recovery and Reinvestment Act of 2009: 95 See id. Summary of Clean Energy Stimulus Funds,” December 2009: 96 Interviews with MNRE officials, March 2012. utahcleanenergy.org/policies_and_issues/arra_clean_energy_ stimulus_summary (accessed April 2, 2012). 97 ADB, “Final ESIA: India: Dahanu Solar Power Project,” 2011: adb.org/Documents/ESIAs/IND/45915/45915-01-ind-esia.pd. 87 “How China Dominates Solar Power,” The Guardian, September Study report for Dahanu 40-MW PV solar power project at 12, 2011: guardian.co.uk/environment/2011/sep/12/how- Dhursar Village, Rajasthan. Project initially proposed for siting china-dominates-solar-power (accessed April 2, 2012); in Jaisalmer, Rajasthan. Thin film PV modules contributed to 37 “China Ready to End Dollar Peg,” The Telegraph, March 6, 2010, percent of the total cost. telegraph.co.uk/finance/7386391/China-ready-to-end-dollar- peg.html (accessed April 2, 2012). 98 V.M. Fthenakis, “Overview of Potential Hazards,” Department of Environmental Sciences, Brookhaven National Laboratory, 88 Between 40 and 50 jobs are created per MW of solar PV 2003: bnl.gov/pv/files/pdf/art_170.pdf (accessed April 2, 2012). manufactured, installed, and operated. With increasing experience and automation, this number is expected to drop 99 E.D. Williams, et al., Environmental Science and Technology, by about 20 percent soon. In contrast, about 80 percent of “The 1.7 Kilogram Microchip: Energy and Material Use in the wind jobs are in manufacturing. See Greenpeace International, Production of Semiconductor Devices,” 2002: pubs.acs.org/doi/ European Renewable Energy Council, “Energy Sector Jobs to abs/10.1021/es025643o; 2030: A Global Analysis,” September 2009: thebioenergysite. E.A. Alsema et al., Materials Research Society Fall 2005 Meeting, com/articles/431/energy-sector-jobs-to-2030-a-global-analysis “Environmental Impacts of Crystalline Silicon Photovoltaic (accessed April 2, 2012). Module Production,” www.ecn.nl/docs/library/report/2006/ rx06010.pdf (accessed April 2, 2012). 89 See European Photovoltaic Industry Association (EPIA), Greenpeace, “Solar Generation: Solar Electricity for Over One 100 “Cooperation Key to Solar Success,” China Daily, December 30, Billion People and Two Million Jobs by 2020,” September 2011: china.org.cn/business/2011-12/30/content_24289927. 2006, www2.epia.org/documents/SG3.pdf (accessed April htm (accessed April 2, 2012). 2, 2012) (NRDC analysis is based on the number of jobs 101 “Taiwan Solar Energy Challenging China,” Green World expected to be created globally across the solar value chain Investor, March 15, 2011: greenworldinvestor.com/2011/03/15/ in 2010 and 2020, listed on p.32 of this report). See also, EPIA, taiwan-solar-energy-challenging-china-taiwanese-solar-

PAGE 35 | Laying the Foundation for a Bright Future cellwaferpanelinverter-manufacturers-following-the-semi- 117 See GWU Report. Using production information and capacity success-path/ (accessed April 2, 2012). factor of 94 percent, from First Solar. 102 A. Bayaliyev, et al., “China’s Solar Policy: Subsidies, 118 750MW cells, 1,250 MW modules. See GoI Solar PV Report. Manufacturing Overcapacity & Opportunities,” George 119 SEMI, “SEMI India Welcomes New Guidelines for National Solar Washington University, December 23, 2011: solar.gwu.edu/ Mission Grid-Connected Solar Power Projects,” September 2, Research/ChinaSolarPolicy_BayaKallozRobins.pdf (“GWU 2011: semi.org/node/38781?id=highlights (accessed April 2, Report,” accessed April 2, 2012). 2012). 103 Josef Haase, Centrotherm, “Solar Modules From Energetica 120 Panchabuta, “U.S. Concerned Over Domestic Content Energietechnik GmbH,” November 2011: posharp.com/ Requirements in India’s Solar Sector,” July 17, 2011: panchabuta. photovoltaic/database.aspx?cid=30e95b72-de07-4c6a-93db- com/2011/07/17/us-concerned-over-domestic-content- b982f529e60e (“Energetica Report,” accessed April 2, 2012). requirements-in-indias-solar-sector/ (accessed April 2, 2012). 104 See id. 121 MNRE, “Jawaharlal Nehru National Solar Mission, Guidelines 105 See id. for Selection of New Grid Connected Solar Power Projects (Batch I),” July 2010; MNRE, “Jawaharlal Nehru National Solar 106 See Prayas Report. Germany is one of the leaders in high-quality Mission, Guidelines for Selection of New Grid Connected Solar solar manufacturing. More than 60 institutions in Germany are Power Projects (Batch II),” July 2010. engaged in PV research, and 143 solar patents were registered in 2008 alone. Germany, Japan, and the U.S. own 70 percent of 122 30 percent domestic content is also mandatory for solar thermal the patents in solar granted between 2005 and 2009, and are projects in Phase 1. See MNRE, “Jawaharlal Nehru National responsible for most technologies deployed today. Solar Mission, Guidelines for Selection of New Grid Connected Solar Power Projects (Batch I),” July 2010. 107 Polysilicon feedstock is one such raw material. 123 To support the NSM, the central government has also provided 108 For example, SOLARCON, a yearly conference, is organized monetary support by sanctioning `43.37 billion (about $1 by SEMI India with an objective to widen solar industry billion) for initial activities government-wide. MNRE alone manufacturing capabilities. allocated `3.6 billion (about $70 million) in 2010-11 for activities 109 “The Solar Power Generation Market Outlook,” Global Business related to the Mission. S. Sen, “The Sun Is Rising in India’s Solar Insights, October 2010: globalbusinessinsights.com/content/ Industry,” EFY Report, December 2009: electronicsforu.com// rben0249m.pdf (“Global Business Insights Report”). EFYLinux/efyhome/cover/December2009/EFY-Report_Solar- 110 See GWU Report. Dec09.pdf (accessed April 2, 2012); See also Panchabuta, “Rs 3.6 Billion Allocated for Jawaharlal Nehru National Solar Mission by 111 See Global Business Insights Report. Using production Ministry of New and Renewable Energy During 2010-11,” March information and capacity factor of 74 percent for average 11, 2011: panchabuta.com/2011/03/11/rs-3-6-billion-allocated- Chinese production; see also GWU Report. for-jawaharlal-nehru-national-solar-mission-by-ministry-of- 112 MOEA is Taiwan’s Ministry of Economic Affairs. Joeng-Shein new-and-renewable-energy-during-2010-11/ (accessed April 2, Chen, “Taiwan PV Industry Overview,” Taiwan Photovoltaic 2012). Industry Association (TPVIA), June 24, 2008: slideshare.net/ 124 Natalie Obiko Pearson, “India May Join U.S.-China Trade Spat ehallSEMI/taiwan-photovoltaic-pv-industry-overview (accessed to Prevent Solar ‘Disaster,’” Bloomberg Businessweek, December April 2, 2012). 24, 2011: businessweek.com/news/2011-12-24/india-may- 113 “The Taiwan Solar Energy Industry Outlook & Renewable Energy join-u-s-china-trade-spat-to-prevent-solar-disaster-.html Business Alliance Seminar at InterSolar NA,” PR Newswire, June (“Bloomberg Businessweek Article,” accessed April 2, 2012). 9, 2011: prnewswire.com/news-releases/the-taiwan-solar- 125 PV News May 2011 Issue, greentechmedia.com/articles/read/ energy-industry-outlook--renewable-energy-business-alliance- pv-news-annual-data-collection-results-cell-and-module- seminar-at-intersolar-na-125264214.html (accessed April 2, production-explode-p/ (accessed April 2, 2012); GBI Research, 2012). “Thin Film Photovoltaic (PV) Cells Market Analysis to 2020,” 114 EEG is Erneuerbare-Energien-Gesetz, Germany’s Renewable altenergymag.com/emagazine.php?art_id=1557 (accessed April Energy Sources Act. See J. Badcock and M. Lenzen, “Subsidies 2, 2012); European Photovoltaic Industry Association, “Market for Electricity-Generating Technologies: A review,” Integrated Report 2011”. Sustainability Analysis, School of Physics, University of Sydney, 126 See Bridge to India Report. Australia, 2006: google.com/url?sa=t&rct=j&q=&esrc=s&source =web&cd=1&ved=0CCQQFjAA&url=http%3A%2F%2Fdunbarc 127 Communication from NVVN, March 28, 2012; see also MNRE ommunityenergy.org.uk%2Ffiles%2F2011%2F11%2FSubsidies- Working Group for 12th Five-Year Plan (2012-2017), “Report of for-electricity-generating-technologies.pdf&ei=O0ZLT96vFqeUi Sub-Group on Grid Solar Power,” August 2011 (“MNRE 5-Year AKz04yLAQ&usg=AFQjCNHm5h1i7MpVt0gxYDADThPH7YuzzA Plan”). See also, Bharat Agrawal, Jenny Chase, and Francesco (“Badcock Report,” accessed April 2, 2012). d’Avack, “India, Solar – STEG – Analyst Reaction,” Bloomberg New Energy Finance, November 30, 2010. 115 See GWU Report. Using production information and capacity factor of 87 percent, from Solarworld. 128 M. Ramesh, “Solar Module Makers Clamor for Protection Against Dumping,” The Hindu Business Line, December 16, 116 See Badcock Report; see also U.S. Dept. of Energy, “The History 2011: thehindubusinessline.com/industry-and-economy/ of Solar,” www1.eere.energy.gov/solar/pdfs/solar_timeline.pdf article2721134.ece (“HBL Module Dumping Article”). The (accessed April 2, 2012). heads of two of the biggest silicon-based solar manufacturing companies, Tata BP Solar and Indosolar, have confirmed that

PAGE 36 | Laying the Foundation for a Bright Future they have hardly any orders on hand and that work has come to 24, 2012, http://panchabuta.com/2012/01/24/maharashtra-to- a near standstill at their factories. revive-rs-20-billion-sakri-solar-project/ (accessed April 2, 2012). 129 See Bloomberg Businessweek Article. Indian suppliers like Tata 141 In India, many manufacturing plants are located in rural areas BP Solar, Indosolar, and Moser Baer have not benefited from the to take advantage of subsidies and low-cost labor, but they DCR. Additionally, there is currently about 1,300 MW and 700 are less accessible to materials transport. Analysis of Chinese MW of manufacturing capacity for silicon modules and solar companies suggests that one reason for their strong growth is cells, respectively. See Bridge to India Report. the easy availability of raw materials. See Energetica Report. 130 See id; see also “Indian Solar Firms ‘Seek Import Duties’ 142 M. Chadha, “Indian Government in Talks With MIT to Source on Thin-Film Panels,” REcharge News, December 20, 2011: Its High-Capacity Solar Power Battery System,” Cleanteachnica. rechargenews.com/business_area/politics/article295016. com, January 24, 2010: cleantechnica.com/2010/01/24/indian- ece (accessed April 2, 2012); S. Jai and V. Desai, “Government: government-in-talks-with-mit-to-source-its-high-capacity- Okay With Chinese Solar Cells if They Meet Quality Standards,” solar-power-battery-system/ (accessed April 2, 2012). Economic Times, January 19, 2012: articles.economictimes. 143 D. Choudhury, “In Conversation: Debasish Paul Choudhury,” indiatimes.com/2012-01-19/news/30642963_1_solar-cells- Energy Next Magazine, August 2011: pvgroup.org/sites/ moser-baer-solar-national-solar-mission (accessed April 2, pvgroup.org/files/In_Conversation_Debasish_Paul_ 2012). Choudhury%5B1%5D.pdf (“Choudhury Interview,” accessed 131 In addition, the states are not interested in imposing such DCR April 2, 2012). requirements since their primary objective is to lower the cost 144 See HBL Module Dumping Article. of solar power. 145 See Choudhury Interview. 132 See Bridge to India Report. 146 Indian Semiconductor Association, “Solar PV Industry 2010: 133 See Mission Document. Contemporary Scenario and Emerging Trends,” May 2010: 134 “HHV Plans Rs 60 cr Silicon Ingots Plant in Bangalore,” isaonline.org/documents/ISA_SolarPVReport_May2010.pdf Business Standard, December 28, 2011, business-standard. (“ISA Report,” accessed April 2, 2012). com/india/news/hhv-plans-rs-60-cr-silicon-ingots-plant-in- 147 “Budget 2012: Remove Inverted Duty Structure for Solar Cells bangalore/459923/ (accessed April 2, 2012). and Modules, Says FICCI,” The Economic Times, February 17, 135 REcharge News, “Norway’s REC talks its way into ‘EU only’ 2012: articles.economictimes.indiatimes.com/2012-02-17/ Italian solar FIT bonus.” September 8, 2011: rechargenews.com/ news/31071336_1_duty-structure-special-additional-duty- energy/solar/article277027.ece. Italy has one such approach import (accessed April 2, 2012). where it offers a 10 percent premium on its feed-in-tariff if 60 148 See id. percent of the material costs of an installation are from products manufactured locally (in the EU). See Renewable Energy World, 149 See id. “New Italian PV Tariffs Complex and Robust -- Effectively No 150 See MNRE 5-Year Plan. Cap on Rooftop Systems,” July 14, 2011: renewableenergyworld. com/rea/news/article/2011/07/new-italian-tariffs-complex- 151 Id. and-robust-2000-mw-may-be-installed-in-2011 (accessed April 152 Elcina, “Union Budget Highlights 2011-12: Overview of the 2, 2012). Economy,” February 28, 2011: elcina.com/policy_UnionBudget. 136 Amiti Sen, “India to defend local-buy policy in solar mission as asp (accessed April 2, 2012). US, EU protest,” The Economic Times, February 3, 2012, articles. 153 See MNRE 5-Year Plan. economictimes.indiatimes.com/2012-02-03/news/31021273_1_ 154 See Mission Document. solar-mission-trade-related-investment-measures-solar-energy (accessed April 2, 2012). 155 For additional examples of R&D institutions and manpower education programs, see Renewable Energy Staff Reporter, 137 Arunabha Ghosh, Governing Clean Energy Subsidies: What, Why, “Marching Ahead...Jawaharlal Nehru National Solar and How Legal?, Geneva International Centre for Trade and Mission,” Akshay Urja Pvt. Ltd., Vol. 4, Issue 4, February 2011: Sustainable Development (forthcoming). re.indiaenvironmentportal.org.in/files/JNNSM_0.pdf (accessed 138 See Mission Document. April 2, 2012). 139 R. Deshmukh, et al., “Need to Realign India’s National 156 S. Singh, “25% Concession on Capex for the Semiconductor Solar Mission,” Economic & Political Weekly, March 2010, Biz on the Cards,” Business Today, April 5, 2011: businesstoday. indiaenvironmentportal.org.in/files/Need%20to%20Realign%20 intoday.in/story/new-semiconductor-policy-25percent- Indias%20National%20Solar%20Mission.pdf (accessed April 2, concession-on-capital-expenditure-for-the-semiconductor- 2012). industry/1/14494.html (accessed April 2, 2012). 140 Phase 1 of the Mission involved limited challenges with 157 Panchabuta, “New Semiconductor Policy With 25% Concession habitat protection and related siting issues. See Pachabuta, on Capex Likely to Boost Solar Manufacturing in India,” April “Maharashtra to revive Rs. 20 billion Sakri solar project,” January 11, 2011: panchabuta.com/2011/04/11/new-semiconductor- policy-with-25-concession-on-capex-likely-to-boost-solar- manufacturing-in-india/ (accessed April 2, 2012).

PAGE 37 | Laying the Foundation for a Bright Future

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